Use the figure below to answer the following question.
If a price ceiling in this market is set at P2, then
A. deadweight loss equals area d.
B. no deadweight loss occurs.
C. deadweight loss equals area h.
D. more information is needed to find deadweight loss.
Answer: B
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If we knew that nominal GDP was currently $7500 billion, and that current GDP in dollars of 1992 purchasing power was $5000 billion, what would we know about the GDP deflator?
A) It would be .667. B) It would be 150. C) Nothing until we had current information on the price level, such as consumer price index figures. D) Only that a dollar buys more currently than it bought in 1992. E) Only that a dollar currently buys less than it bought in 1992.
The financial crisis occurred in 2008 in large part because of losses on securities consisting of bundles of mortgage loans known as
A) home loan loss reserves. B) credit default swaps. C) mortgage-backed securities. D) naked put options.
Suppose that the preferences a typical American has for quantities of electricity (E) and gasoline (G) is given by U(E,G) = a ln(E) + (1 - a) ln(G) where 0 < a < 1
Suppose the prices of gasoline and electricity in the units provided are both $1/unit and the consumer has an income of $100. Suppose in addition, the government has chosen to ration electricity by allowing a maximum consumption of 50 units of electricity (E ? 50). a. If a = .25, find the optimal consumption bundle of gasoline and electricity. Does the electricity rationing constraint have an influence on consumer's choice? b. If a = .75, find the optimal consumption bundle of gasoline and electricity. Does the electricity rationing constraint of the government have an influence on the consumer?
The Fed's countercyclical policy during the expansion and prosperity phases of the business cycle includes
a. raising the legal reserve requirement, raising the discount rate, and selling government bonds on the open market b. raising the legal reserve requirement, raising the discount rate, and buying government bonds on the open market c. raising the legal reserve requirement, cutting the discount rate, and selling government bonds on the open market d. raising the legal reserve requirement, cutting the discount rate, and buying government bonds on the open market e. lowering the legal reserve requirement, cutting discount rates, and buying government bonds on the open market