Which of the following statements is true when wages are above the market clearing wage?
A) The larger the gap between the current market wage and the market clearing wage, greater will be the amount of unemployment.
B) At wage rates above the market clearing wage rate, there is an excess demand for workers.
C) At wage rates below the market clearing wage rate, there is an excess supply of workers.
D) The larger the gap between the current market wage and the market clearing wage, smaller will be the amount of unemployment.
A
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Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?
A) The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family. B) The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns. C) The Keynesian model assumes that the level of real GDP is inflexible. D) The Keynesian model assumes that nominal wages are inflexible downward.
A positive externality causes
A) the marginal social benefit to be less than the marginal private cost of the last unit produced. B) the marginal private benefit to exceed the marginal social cost of the last unit produced. C) the marginal social benefit to exceed the marginal private cost of the last unit produced. D) the marginal social benefit to be equal to the marginal private cost of the last unit produced.
When the Fed sells government bonds,
a. the money supply increases and the federal funds rate increases. b. the money supply increases and the federal funds rate decreases. c. the money supply decreases and the federal funds rate increases. d. the money supply decreases and the federal funds rate decreases.
Built-in stability means that:
A. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. C. Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. D. government expenditures and tax receipts automatically balance over the business cycle,