If the Fed decides to tighten monetary policy because the inflation rate has risen to a level inconsistent with economic efficiency and long-term growth:
A. in the long run the AD curve will shift to the left and the long-run equilibrium is restored.
B. in the short run the AD curve shifts to the left and a recessionary gap is created.
C. in the short run the AD curve shifts to the right and a recessionary gap is created.
D. in the short run the SRAS curve will shift downward and a recessionary gap is created.
Answer: B
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In the figure above, the ________ gap is one trillion dollars. To close the gap, the government can change expenditure by ________ one trillion dollars
A) recessionary; less than B) inflationary; exactly C) inflationary; more than D) recessionary; more than E) recessionary; exactly
A cake is to be shared by two people. Both desire the largest piece possible. One of the two will cut the cake. Under which of the following situations will the cutter adopt a Rawlsian social welfare function?
A) The person cutting the cake chooses the first piece. B) The person not cutting the cake chooses the first piece. C) The two individuals will bid for the right to cut the cake and choose first. D) The two individuals will toss a coin for the right to cut the cake and choose first.
Which of the following is an explicit cost of production?
A. the electric bill B. wages paid to workers C. purchases of raw material D. Only answers A and B are explicit costs because the purchases of raw material is only an opportunity cost. E. Answers A, B, and C are all
Who is affected when a Pigouvian subsidy is imposed on a market with a positive externality?
A. Producers B. Those affected by the externality C. Consumers D. All of these groups would be affected.