"A price floor that is less than the equilibrium price leads to a shortage of the good." Is this assertion true or false? Explain your answer
What will be an ideal response?
The assertion is false. A price floor is the minimum price that can legally be charged. If the price floor is less than the equilibrium price, it has no effect because the equilibrium price is already in compliance with the law. Hence a price floor set below the equilibrium price has no effect. However, a price floor set above the equilibrium price will have an effect and will create a surplus of the good.
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Which of the following is the most likely cause of most recessions according to the new classical model?
a. a change in the money supply. b. an increase in taxation and government spending. c. a fall in expected profits. d. a rise in the price of oil. e. an unanticipated change in the money supply.
Adverse selection problems in health insurance are reduced by all of the following except: a. requiring physical exams
b. requiring patients to pay higher deductibles. c. insuring entire groups. d. by limiting the period of open enrollment in health insurance plans.
If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?
The largest income component in the national income accounts is
A. wages. B. rents. C. corporate profits. D. interest.