Prices influence the distribution of income by making the distribution fairer.
Answer the following statement true (T) or false (F)
False
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The time lags, which must be either reduced or known with some precision if fiscal policy is to be an effective stabilizing technique, are the lags between
A) the beginning of a cyclical movement and its recognition. B) the decision that compensatory action should be taken and the enactment of tax or expenditure changes. C) the increase or decrease in net government receipts and their final effects on total spending. D) all of the above, because a significant miscalculation with respect to any of these lags could increase aggregate instability.
Refer to Table 6-3. Over what range of prices is the demand inelastic?
A) between $12 and $16 B) over the entire range of prices C) between $8 and $16 D) between $2 and $8
Consider a market with just one firm. The demand in the market is p = 18 – Q and the firm has a linear cost function C(Q) = 2Q
a. How much output will this firm produce. What will be the profit and consumers surplus? b. Suppose a second firm with the same cost function enters the market and the two firms compete in a Cournot style (simultaneous output choice). What will be the equilibrium price and quantity in the market? What is the total market profit and CS?
An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____
a. one percent; quantity supplied; two units b. one unit; quantity supplied; two units c. one percent; quantity demanded; two percent d. one unit; quantity demanded; two units e. ten percent; quantity supplied; two percent