The long-run market solution to a wage that is so low that workers cannot survive is:
A. the starvation of some low-wage workers until the supply of labor shifts to the left and the wage for survivors increases to above subsistence.
B. the reallocation of scarce resources to those who need it the most.
C. government intervention into the market to establish a minimum wage so that all workers earn at least a subsistence wage.
D. the reallocation of property rights, reducing the wage of some but increasing the wage for those earning a below-subsistence wage.
Answer: A
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Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?
A) Unemployment will decline. B) Output will increase. C) Prices will decline. D) Short-run aggregate supply will shift to the left.
The reserves supply schedule has a positive slope because
a. the Fed lowers the discount rate as interest rates rise. b. the Fed makes more money available at higher interest rates. c. as interest rates rise, banks will find loans more profitable. d. as interest rates rise, people will demand more loans.
Arthur Pigou put forward the idea that positive and negative externalities can be resolved by creating new private property institutions.
Answer the following statement true (T) or false (F)
The existence of the Federal Deposit Insurance Corporation (FDIC):
A. increases the risk of moral hazard in the savings and loan industry. B. reduces the risk of moral hazard in the savings and loan industry. C. increases the risk that customers of savings and loans will engage in moral hazard, but reduces the risk that the lenders will engage in moral hazard. D. reduces the risk that customers of savings and loans will engage in moral hazard, but increases the risk that the lenders will engage in moral hazard.