To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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A tax levied on purchases of a particular good or service
A) is illegal because it is discriminatory. B) always leads to a reduction in total tax revenues. C) always leads to an increase in total tax revenues. D) is an excise tax.
The "natural rate of unemployment" is
a. the highest unemployment rate that can be tolerated b. affected by social programs c. not accepted among economists d. likely to be above 10 percent e. not an economic concept
Suppose that you open your own business and earn an accounting profit of $35,000 per year. When you started your business, you left a job that paid you a $30,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your business. If the normal rate of return on capital is 10 percent, your economic profit is
A. -$2,000. B. -$5,000. C. $5,000. D. $2,000.
The law of supply
A. states that price and quantity supplied are inversely related. B. states that price and quantity supplied are directly related. C. is identical to the law of demand. D. None of these choices are correct.