??Exhibit 16A-2 Macro AD/AS Models
?
?In Panel (b) of Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. If the federal government or Fed decides to intervene, it would most likely:
A. ?decrease taxes.
B. ?increase the money supply.
C. increase the level of government spending for goods and services.?
D. ?decrease the level of government spending for goods and services.
Answer: D
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Suppose the United Automobile Workers union agrees to accept lower wages for members if the automobile manufacturers lower their prices to buyers
Will the UAW's measures usually result in a larger number of cars being sold and hence more jobs for UAW members? A) No, because people only buy new cars when they need them. B) Not if the price elasticity of demand for new cars turns out to be less than one. C) Only in the unlikely event the demand for new cars is unit elastic. D) Probably not, because new car sales depend on advertising. E) Yes.
The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing the 26th car?
A) 2 tons of grain per car B) 4 tons of grain per car C) 0.25 tons of grain per car D) 0.5 tons of grain per car
The marginal private cost of a chemical is $100 per ton and its marginal external cost is $20 per ton. What is the marginal social cost of the chemical?
What will be an ideal response?
The notion that buyers determine what will be produced by choosing what they purchase is called consumer sovereignty.
Answer the following statement true (T) or false (F)