In the standard theory of compensating differentials, a worker's reservation price is the
A. amount of money a worker loses for not taking any job.
B. amount of money it costs a worker to take a risky job.
C. difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs.
D. amount of money it takes to entice the worker into accepting a risky job.
E. amount of money it costs a worker to take a safe job.
Answer: D
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
If the quantity of real GDP supplied equals the quantity of real GDP demanded, then
A) nominal GDP must equal real GDP. B) real GDP must equal potential GDP. C) real GDP must be greater than potential GDP. D) real GDP might be greater than, equal to, or less than potential GDP. E) real GDP must be less than potential GDP.
Which of the following increases the supply of a product?
A) a fall in the price of the product B) a smaller number of sellers producing the product C) an increase in foreign imports of the product D) higher taxes imposed upon producers of the product
Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate
A) determines how tax revenue will change as national income increases. B) determines how much revenue the government will have to spend. C) always equals the average tax rate which is harder to measure. D) affects people's willingness to work, save, and invest.