In your environmental economics study group, a friend argues that using taxes to control pollution is not efficient because, even with taxes, a positive amount of pollution is still produced. Do you agree?
What will be an ideal response?
No, an efficient outcome is not necessarily the one where pollution is completely eliminated. The efficient level of pollution occurs at the point where the marginal benefit from the good that is being produced is equal to the marginal social cost of the good. The marginal social cost includes the costs of pollution.
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A variable that the Federal Reserve focuses on because it has a direct link to the variables the Fed is ultimately concerned about is known as a(n)
a. median target. b. short-term target. c. immediate target. d. intermediate target.
Your textbook so far considered variables for cointegration that are integrated of the same order
For example, the log of consumption and personal disposable income might both be I(1) variables, and the error correction term would be I(0), if consumption and personal disposable income were cointegrated. (a) Do you think that it makes sense to test for cointegration between two variables if they are integrated of different orders? Explain. (b) Would your answer change if you have three variables, two of which are I(1) while the third is I(0)? Can you think of an example in this case? What will be an ideal response?
Nominal wages are assumed fixed in the short run because: a. workers have wages stated in their contracts
b. of minimum wage laws. c. workers are unaware of short-run changes in their real wages. d. all of the above are true. e. none of the above are true.
If the Fed wanted to expand the money supply as part of an antirecession strategy, it could
a. increase the reserve requirements. b. buy U.S. securities on the open market. c. raise the discount rate. d. sell U.S. securities on the open market.