After September 11, 2001, President George W. Bush believed in the need for a fiscal stimulus. The proper fiscal policy to reflect this could include a(n)
a. increase in taxes.
b. reduction in transfer payments.
c. increase in government purchases.
d. All of the above are correct.
c
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Assume a consumer purchases two goods: X and Y. All else constant, an increase in the price of X would cause the total utility the consumer can obtain with her available income to decrease
Indicate whether the statement is true or false
The government is considering a mandatory savings program that forces people to save 8% of their income each year for retirement. What behavioral biases might be used as a justification for such a program? (Choose all that apply.) a. Limited cognitive ability, preventing people from being able to accurately estimate how much an investment early in one's career will grow. b. Limited willpower,
preventing people from being able to give up the pleasure of current consumption for the benefits of consumption later in retirement. c. Limited commitment power, leading the government to use the funds for current expenditures. d. Risk aversion, leading people to consume now rather than wait until the uncertain future.
Gradual adjustment of prices and wages to an increase in the aggregate demand curve implies that the aggregate supply curve is:
a. horizontal. b. vertical. c. upward sloping but not vertical. d. downward sloping.
Suppose that the producers of copper are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of copper products in a competitive market compare with their values under conditions of ideal economic efficiency?
a. The price will be too high, and the output will be too large. b. The price will be too low, and the output will be too large. c. The price will be too low, and the output will be too small. d. The price will be too high, and the output will be too small.