Determining the most socially desirable level of income equality or inequality
a. is done through markets, rather than by the government
b. is done directly by firms
c. involves normative economics
d. involves evaluation of public goods
e. involves evaluation of all externalities, both positive and negative
C
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A shoe salesman working on commission must decide whether to work hard or shirk. Working hard would increase the probability of a sale from 20% to 70% but the effort would cost him $5 . If the commission on a typical pair of shoes was $12, would he decide to work hard?
a. Yes because it is higher than what it costs him in effort b. Yes because it is higher than zero c. No, because it costs him more in effort d. None of the above
Explain why a balanced budget has an expansionary effect on the economy
In the Keynesian transmission mechanism, if the money market is in the liquidity trap, an increase in the money supply will
A) cause total expenditures and aggregate demand to increase. B) cause total expenditures and aggregate demand to decrease. C) have no impact on total expenditures and aggregate demand. D) cause total expenditures to increase and aggregate demand to decrease. E) cause total expenditures to decrease and aggregate demand to increase.
Which of the following is a function of the Federal Reserve System?
fiscal policy (is determined the President and Congress) tariffs and quotas free trade monetary policy