In the 1960s, there was significant debate between Keynesians and monetarists. Explain several aspects of this debate
What will be an ideal response?
There were three key areas of this debate: (1 ) the relative importance of monetary and fiscal policy; (2 ) the perceived stability of the Phillips curve; and (3 ) the role of policy to stabilize the economy.
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A comparison of the average growth rates across time for developed nations indicates that
A) nations with lower levels of income grow more quickly than those with higher levels of income. B) nations with lower levels of income will never be as rich as nations with high levels of income. C) nations with high levels of income experience a continuously increasing growth rate. D) nations with lower levels of income grow more slowly than those with higher levels of income.
What are the defining features of classical macroeconomics and what policies do classical macroeconomists recommend?
What will be an ideal response?
If the demand for gasoline becomes more elastic over time,
a. the demand curve will shift out. b. the demand curve will become flatter. c. other things being equal, the equilibrium price of gasoline must fall. d. other things being equal, the equilibrium quantity of gasoline must fall.
Suppose a large firm allows its employees to choose whether to participate in its health insurance plan. The firm is trying to decide between two plans: Plan I has a low monthly premium but a high deductible, and Plan II has a high monthly premium but a
low deductible. Under which plan is adverse selection likely to be a bigger problem? A) Plan I because it is likely to draw participants who expect high medical costs. This group expects to consume much health care services and therefore prefer low deductibles. B) Plan II because it is likely to draw participants who expect high medical costs. Healthy individuals who do not expect to consume much health care services will not be willing to pay the high premiums. C) Plan I because it is likely to draw the relatively healthy employees who do not expect to spend much on health care. Because the monthly premiums are low, the insurance company has to bear a bigger financial burden in the event of serious illnesses. D) Plan II because it is likely to draw employees who tend to over-consume health care services because of the low deductible. Insurance companies are likely to end up paying out more claims than the premiums they collect.