If Congress raised taxes on businesses, this action would:
A. increase per-unit production costs and thus decrease aggregate supply.
B. increase aggregate demand and increase aggregate supply.
C. increase per-unit production costs and thus increase aggregate supply.
D. increase per-unit production costs and thus increase aggregate demand.
Answer: A
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________ is an increase in the price level, while ________ is an increase in the price of one good in comparison to other goods and services.
A. Hyperinflation; inflation B. Inflation; hyperinflation C. Inflation; a relative price increase D. A relative price increase; inflation
Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?
A) growth in capital per hour worked accompanied by technological change B) increases in labor force participation rates as workers who are out of the labor force pursue rising wages C) a shift of workers in the economy from the agricultural sector to the nonagricultural sector D) an influx of immigrant labor into an economy without any accompanying technological change
Return to the situation with the executive from the previous question. Now assume that shareholders cannot observe effort, so cannot specify how hard the executive works in the contract but must induce it through the incentive scheme. Which of the following wage contracts would work out best for shareholders in equilibrium?
a. A flat wage w = 2,500 with no profit share. b. A share of 35% of the gross profits. c. A share of 55% of the gross profits. d. A share of 70% of the gross profits.
The manner in which FDIC deposit insurance is set up in the United States encourages banks to
A. maintain excess reserves that are too great. B. reject some loans that probably would be profitable. C. make riskier loans than they otherwise would. D. be too conservative in their lending practices.