Based on the 'early incarnation' of the Phillips curve, explain what effect an increase in the unemployment rate will have on the inflation rate
What will be an ideal response?
An increase in u will cause a reduction in W. As W falls, firms' costs fall. As firms' costs fall, they will reduce the price level. This reduction in the price level represents, in this case, deflation.
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Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $10, we would expect that
A) price will increase until quantity demanded equals quantity supplied. B) demand will decrease until quantity demanded equals quantity supplied. C) supply will increase until quantity demanded equals quantity supplied. D) there will be no change in the price since the market is in equilibrium.
If a coalition D is decisive over a pair of social outcomes (x,y) under a social choice process that satisfies Arrow's axioms, then another coalition C (that differs from D) cannot be decisive over a different pair (a,b) of social outcomes.
Answer the following statement true (T) or false (F)
In order to continue its operations, in the long-run a firm must
a. Charge a price that is equal to its AVC b. Charge a price that is equal to its AFC c. Charge a price that is equal to its AVC + AFC d. Need more information to determine the price
Which of the following statements is false?
A. An income tax taxes savings twice only if consumption is the measure used to gauge a person's ability to pay. B. Proponents of income as a tax base argue that you should not be taxed on what you draw out of the common pot, but rather on the basis of your ability to draw from the pot. C. At this time, there is not clear consensus on what the best tax base is. D. The double taxation of saving tends to increase the saving rate because people have to save more to keep the after-tax yield constant.