Explain whether uncertainty should cause policy makers to do more or do less to stabilize the economy
What will be an ideal response?
As uncertainty increases, policy makers should do less. Alternatively, more active policies would actually lead to more uncertainty. This is based on, as Blanchard notes, multiplicative uncertainty.
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A difference between the classical and new classical models is that
a. classical economists assumed that labor suppliers knew the real wage, while the new classical economists assume they form a rational expectation of the real wage. b. classical economists assumed that the money wage was flexible while the new classical economists assume it was fixed. c. new classical models do not assume perfect competition. d. labor supply in the classical model is a function of the real wage while labor supply depends on the money wage in the new classical model. e. both a and c.
If the law of diminishing marginal productivity holds true, both average total cost and marginal cost must diminish as output increases.
Answer the following statement true (T) or false (F)
A price restriction that tells suppliers the minimum price they can sell their goods for is also known as
A) a price ceiling. B) a quota. C) a price floor. D) deadweight loss.
Refer to the information provided in Table 19.7 below to answer the question(s) that follow.
Table 19.7 
Refer to Table 19.7. The tax rate structure in this example is
A. proportional. B. regressive. C. progressive. D. marginal.