An economy could produce above its potential GDP for a short period of time by
a. reducing the size of the labor force.
b. increasing the price of final goods and services.
c. adding extra shifts of work, such as overtime or night shifts.
d. increasing the money supply.
c
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A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives
Indicate whether the statement is true or false
The foreign exchange rate can be influenced by the Federal Reserve
a. True b. False
All of the following questions or statements regarding tariffs are positive statements except:
A) Economic models can be used to estimate the dollar amounts gained by the winners from the imposition of a tariff. B) Economic analysis can, by itself, decide whether a tariff proposal should be enacted. C) Economic analysis can show the size of the loss of economic efficiency from the imposition of a tariff. D) Economic models can be used to estimate the dollar amounts lost by the losers from the imposition of a tariff.
Suppose a consumer advocacy group has convinced legislators that vitamin pills should be free to consumers. Such a policy would enhance the health of the citizenry, they argue. Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting output and social welfare from such a policy. Compare this result to the competitive equilibrium
What will be an ideal response?