Refer to Figure 8.3. Holding other variables constant, if the economy is originally in equilibrium at the intersection of D2 and S2 and households increase their preference for leisure over labor, the economy would move to the new equilibrium point
represented by A) w1 and L2.
B) w3 and L2.
C) w2 and L2.
D) w2 and L1.
B
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Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president and Congress increased government purchases by $500 billion, what would be the result on the economy?
. What will be an ideal response?
According to rational expectations,
A) the Fed should focus its policies on interest rates. B) the Fed should focus its policies on inflation. C) the Fed should focus its policies on unemployment. D) the Fed is unable to influence real economic activity.
Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?
A) Cournot B) Stackelberg C) Monopoly D) Price is the same in all three markets.
If we were to pay everyone exactly the same income
A) there would be a large amount of economic growth. B) there would be no incentive to invest in human capital. C) more people would seek an education. D) productivity would increase.