Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is below the 45-degree line at full-employment GDP. This vertical distance is called a(n):
A. inflationary gap.
B. recessionary gap.
C. negative GDP gap.
D. marginal propensity to consume gap.
Answer: B
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The Coase theorem states that
A. transaction costs consist of marginal private costs and marginal social costs and are higher when exchange is subject to increasing marginal costs. B. transaction costs are the difference between marginal social costs and marginal private costs and are higher when exchange is subject to decreasing marginal costs. C. when transaction costs are significant, the resource-allocative outcome will be the same regardless of who is assigned the property rights. D. when transaction costs are insignificant, the resource-allocative outcome will be the same regardless of who is assigned the property rights. E. b and c
One way to remove the excess labor supply problem from a minimum wage policy is to have the government hire all unemployed workers at the minimum wage. What is the key drawback of this version of a minimum wage policy?
A) The deadweight loss may increase substantially. B) The cost to the government may be very large. C) Consumer surplus losses increase further. D) A and B are correct. E) B and C are correct..
For a person earning $75,000, the marginal tax amount from 10,001 to $15,000 is:
A. $500
B. $750
C. $1,750
D. $2,000
State provision of free healthcare may encourage individuals to engage in unhealthy behavior, such as excessive smoking or consumption of alcohol. This is an example of ________
A) moral hazard B) a positive externality C) adverse selection D) anchoring