What role can the government play in correcting for externalities?
What will be an ideal response?
The government can create taxes and subsidies to help decision makers internalize the external benefits or costs. This would allow these individuals to take the true cost and true social value into account when making decisions regarding production or purchases.
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During the years 1979 to 1982, the Federal Reserve's announced policy was monetary targeting. During this time period the Federal Reserve
A) hit all of their monetary targets. B) did not hit any of their monetary targets because it is believed that controlling the money supply was not the intent of the Federal Reserve. C) did not hit any of their monetary targets because they were unrealistic. D) hit about half of their monetary targets.
The equilibrium level of employment, achieved after the complete adjustment of wages and prices, is known as the
A) zero-unemployment level of employment. B) natural state. C) invisible handshake. D) full-employment level of employment.
Positive net exports are treated like domestic investment in the national income accounts because they are
A) always part of inventories. B) fixed assets not intended for resale. C) they represent future flows of real income. D) not intended for resale.
If the government spends exactly what it receives in taxes during a given interval, then the result is
A) a balanced budget. B) the gross public debt. C) the net public debt. D) a government budget deficit.