Which of the following statements about the Social Security, Medicare, and Medicaid programs is true?
A) Spending on these three programs will rise from 10.4% of GDP currently to 19.7% of GDP by 2040.
B) Costs are being driven up by the fact that Americans are living longer and medical costs are rising substantially.
C) Some economists have argued for decreasing taxes to help with these programs' funding problems.
D) Some economists have argued for increasing benefits to help with these programs' funding problems.
Answer: B
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Of the following, which is NOT a monetary policy rule the Fed could follow?
A) an unemployment rate targeting rule B) an inflation targeting rule C) a money targeting rule D) a k-percent rule E) a nominal GDP targeting rule
If a “conservative” wanted to increase aggregate demand, which of the following would he or she tend to favor?
A. An increase in government spending, because it has a larger multiplier than tax changes. B. A decrease in transfer payments, because it keeps the public sector small. C. An increase in transfer payments, because it has a larger multiplier than tax changes. D. A decrease in taxes, because it makes the public sector smaller.
Consider a monopolist attempting to engage in limit pricing with total costs C(Q) = 200 + 10Q. The market (inverse) demand for its product is P = 150 ? 2Q. Currently, the monopolist produces 40 units of output. Assuming the potential entrant has the same cost structure as the incumbent monopolist, is it profitable for the entrant to produce 20 units of output?
A. No, since the market price of $70 is less than the average total cost of producing 20 units. B. No, since the market price of $30 is less than the average total cost of producing 20 units. C. Yes, since the market price of $70 is greater than the average total cost of producing 20 units. D. Yes, since the market price of $30 is greater than the average total cost of producing 20 units.
For which product is the income elasticity of demand most likely to be negative?
A. Bread B. Used clothing C. Computer software D. Golf balls