To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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When the government's outlays equal its tax revenue, then the budget
A) is in deficit. B) is in surplus. C) is balanced. D) could be either in surplus or deficit. E) is legal only because expenditures equal tax revenues.
From a firm's point of view, when the demand for a good has a price elasticity of 0.5, then, all things remaining the same, a(n):
A) increase in the price of the good will decrease the firm's revenue. B) increase in the price of the good will increase the firm's revenue. C) change in the price of the good will not affect the firm's revenue. D) change in the price of the good will not affect the quantity of the good demanded by consumers.
Which of the following would shift the supply curve for MP3 players to the right?
A) a decrease in the number of firms that produce MP3 players B) an increase in the price of a substitute in production C) a decrease in the price of an input used to produce MP3 players D) an increase in consumer income (assuming that all MP3 players are normal goods)
Maurice Allais, Reinhard Selten, and Vernon Smith all were awarded the Nobel Prize in Economics in part because
A) they proved that external economies would lead to market failure. B) of their work on the substitution and income effects of price changes. C) of their work with experimental economics. D) they discovered the first example of a Giffen good.