An example of the command-and-control approach to environmental policy is:
A. placing a tax on freon to reduce its use and the corresponding CFC emissions (which contribute to the ozone hole).
B. requiring car producers to install new air conditioners that do not use freon.
C. allowing coal producers to buy and sell permits to allow CFC emissions.
D. allowing individuals to sue freon producers if CFC emissions exceed a government-set standard.
Answer: B
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
The Phillips curve is thought to reflect the relationship between
A) unemployment and inflation. B) the price level and inflation. C) unemployment and real GDP. D) inflation and real GDP.
Comparing the examples of Denmark and the United Kingdom in relationship to the European Monetary Union, the krone is pegged to the euro, whereas the British pound is not. What can be predicted then about their interest rates?
a. The United Kingdom has the ability to set its own interest rates and pursue an independent monetary policy, whereas Denmark's rates are virtually the same as those of the euro. b. Denmark gets the benefits of having fixed exchange rates as well as having an independent monetary policy and the ability to set its own rates of interest. c. Denmark's price level in the long run will be much higher than the Eurozone because it has to keep exchange rates fixed. d. The United Kingdom will discover that it cannot lower its own interest rates after all, or the pound will depreciate so far that no investors will make investments in the United Kingdom.
When real wages decline, ______.
a. employers must fire workers b. employers can hire more workers c. workers have fewer job opportunities d. workers have lower expenses