The market for used cars is shown in the above figure. Neither buyers nor sellers can tell whether any given car is a lemon. Forty percent (40%) of all cars are lemons. Which of the following statements is TRUE?
A) All of the cars will be sold at $1,600.
B) No cars will be sold.
C) Only lemons are sold for $1,000.
D) Only good cars will be sold for $2,000.
A
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If the quantity of money starts to grow more rapidly than real GDP and velocity does not change, the result is
A) slower growth in the price level. B) an increase in investment. C) more rapid growth in potential GDP. D) the inflation rate rises. E) an eventual slowing in the growth rate of the quantity of money.
The price received by sellers in a market will increase if the government decreases a
a. binding price floor in that market. b. binding price ceiling in that market. c. tax on the good sold in that market. d. None of the above is correct.
How does a higher level of saving lead to higher GDP in the future?
(A) Because increased savings will divert money that would be spent on imported goods in the current year. (B) Because more capital is available for investment, leading to higher output through capital deepening. (C) Because a higher national savings rate encourages immigration and expands the labor force. (D) Because the government taxes savings accounts to pay for education.
Graphically illustrate (using the WS and PS relations) and explain the effects of a reduction in the markup on the equilibrium real wage, the natural rate of unemployment, the natural level of employment, and the natural level of output
What will be an ideal response?