If crime rates in the United States fall, can incumbent lawmakers rightfully claim credit? Why or why not?
What will be an ideal response?
Probably not. Lower crime rates can occur for many reasons including a change in the age distribution of the population and lower unemployment rates. One cannot simply conclude that the lawmakers in office were responsible for the lower crime rates, until other plausible reasons have been ruled out.
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In the long run, the effect of a reduction in the money supply is to
A) decrease both the price level and real Gross Domestic Product (GDP). B) decrease real Gross Domestic Product (GDP) only. C) decrease the price level and increase real Gross Domestic Product (GDP). D) decrease the price level only.
If governments promise to bail out the financial system in the event of a crisis, this creates a moral hazard problem. Describe this problem
What will be an ideal response?
A firm that maximizes profits also
A) is inefficient. B) cuts corners in production processes so that its products are made too cheaply. C) uses the least-cost combination of resources. D) pays input prices lower than other firms do.
This graph demonstrates the domestic demand and supply for a good, as well as the world price for that good.
According to the graph shown, if this economy were an autarky, consumers would get area:
A. A in consumer surplus. B. ABCDEFG in consumer surplus. C. ABCD in consumer surplus. D. ABC in consumer surplus.