Explain what effect an increase in future expected output will have on the IS curve and LM curve in the current period
What will be an ideal response?
An increase in Ye will cause human wealth to be higher. Individuals will increase their current consumption and the IS curve will shift right. An increase in Ye will also cause firms to increase their expectations of future expected profits. When this occurs, the discounted present value of future profits is higher causing I to increase. As I increases, the IS curve shifts right. This will have no effect on the LM curve.
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Refer to the graph shown, which shows the demand and supply for a new vaccine against the common cold. Suppose once vaccinated, a person cannot catch a cold or give a cold to someone else. As a result, the marginal social benefit curve will:
A. lie below the market demand curve. B. coincide with the market demand curve. C. lie above the market demand curve. D. lie strictly below the market supply curve.
A country can actually improve its well-being if it is in a position to impose a non-zero "optimal tariff." Explain what an optimal tariff is, what conditions must be in place to implement an optimal tariff, and how such a tariff will increase national welfare. Assuming a country could impose an optimal tariff, would you suggest it do so? Justify your answer.
What will be an ideal response?
Is it possible for technological change to be negative? If so, give an example
What will be an ideal response?
A comparative advantage in the production of coal is held by
A. Australia.
B. the United States.
C. both countries.
D. neither country.