Cuba is a command economy that suffered decline in economic growth because of a cut in support from the former Soviet Union when it collapsed. As a consequence, Cuba:
A. moved along its existing production possibilities curve.
B. went to a point inside its production possibilities curve.
C. experienced a shift inward in its production possibilities curve.
D. experienced a shift outward in its production possibilities curve.
Answer: C
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Regardless of the size of wealth and substitution effects for workers, the benefit of a wage subsidy will accrue disproportionately to workers if the labor supply curve is relatively more wage-inelastic than the labor demand curve.
Answer the following statement true (T) or false (F)
Refer to the scenario above. If the government enforces a ban on Firm B, and asks Firm A to carry out all the production:
A) Firm A's marginal cost is likely to decrease, but its average cost is likely to increase. B) Firm A's marginal cost and average cost are likely to decrease. C) Firm A's marginal cost is likely to increase, but its average cost is likely to decrease. D) Firm A's marginal cost and average cost are likely to increase.
The IS curve is Y = 20 - 1.5r, and the aggregate demand curve is Y = 15.5 - 0.3?. The monetary policy curve is ________
A) r = 4.5 - 1.8? B) r = 20 + 0.3? C) r = 3 + 0.2? D) Y = 17.75 + 0.6? E) none of the above
According to the active policy approach, the elimination of a recessionary policy _____
a. can only be achieved by decreasing wages b. requires a public policy of wage and price controls c. should be accomplished by stimulating aggregate demand d. will increase unemployment e. will cause a recession