Refer to Figure 24-1. Ceteris paribus, an increase in the price level would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
D
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Suppose a person's utility for leisure (L) and consumption (Y) can be expressed as U = Y + L0.5. Show what happens to the person's labor supply curve when the income tax is cut from 70 percent to 30 percent. Denote hours worked as H and wage per hour as w
What will be an ideal response?
Refer to the diagram. The initial aggregate demand curve is AD 1 and the initial aggregate supply curve is AS 1 . Demand-pull inflation in the short run is best shown as:
A. a shift of the aggregate demand curve from AD 1 to AD 2 .
B. a move from d to b to a.
C. a move directly from d to a.
D. a shift of the aggregate supply curve from AS 1 to AS 2 .
What can cause the price of a good to rise?
A. An increase in demand or a decrease in supply B. An increase in demand or an increase in supply C. A decrease in demand or an increase in supply D. A decrease in demand or a decrease in supply
If there is unemployment and all businesses are operating at less than full capacity, then
A) society is at the wrong point on the production possibilities curve. B) there are too many workers, and some people ought to leave the labor force. C) we are not experiencing a net social cost to unemployment because it is offset by the capacity levels of the factories. D) society is producing inside its production possibilities curve.