Consider the following three statements:
i. You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand.
ii. Your friend tells you that he expects many people to stand at football games.
iii. An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit.
Which of these statements deals with optimization, which deals with equilibrium, and which deals with empiricism? Explain.
The first statement involves optimization. You believe that you will be best off if you stand regardless of the decisions other people make. The second statement involves equilibrium. If many other people also reason as you did then we should expect many people will decide to stand. The third statement involves empiricism. Our theory tells us that we should expect many people to stand at games. This economist's empirical study supports the theory.
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Despite the large federal deficits during the last few decades, public capital in the U.S. declined because: a. a growing share of the federal budget goes toward income redistribution, especially for the elderly. b. of less labor productivity
c. of increasing farm subsidies. d. of the growing portion of the national debt owed to foreigners. e. a growing share of the federal budget goes toward income redistribution, especially for national defense
Which of the following situations will cause the supply of British pounds to rise in the foreign exchange market?
a. The price level in the United States rises faster than the price level in the United Kingdom. b. The real GDP in the United States grows while the real GDP in the United Kingdom remains constant. c. The interest rate in the United Kingdom falls while the interest rate in the United States remains constant. d. The tax rate in the United States rises while the tax rate in the United Kingdom does not change.
If a shortage exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.
If in the economy, business saving equals $240 billion, household saving equals $15 billion and government saving equals -$150 billion, what is the value of national saving?
A. $265 billion B. $250 billion C. $105 billion D. $415 billion