An economic agreement between countries to allow free trade between members, a common external trade policy, and coordinated monetary and fiscal policies is called
a. an economic union.
b. a common market.
c. a trade forum.
d. a free trade agreement.
a. an economic union.
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Refer to Exhibit 16-11. Assume that the starting point is point 1. Suppose that there is a supply-side change capable of reducing the capacity of the economy to produce. Which of the following best goes with the diagram shown?
A) New classical theory with policy incorrectly anticipated, bias downward
B) New classical theory with policy incorrectly anticipated, bias upward
C) Real business cycle theory
D) New classical theory with policy unanticipated
E) Policy ineffectiveness proposition (PIP)
Both the long-run and short-run aggregate supply curves will shift when
A) the endowments of the factors of production change. B) the government increases defense spending. C) an event occurs which is expected to last only a short period of time. D) they are both upward sloping.
The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called
A) transactions cost theory. B) cost—benefit theory. C) menu cost theory. D) gift exchange theory.
According to the analysis in your text, the school voucher program would
A. increase the quality of education, but not improve the welfare of low income families. B. decrease the quality of education. C. increase the quality of education. D. not affect education quality, but would make lower income families better off.