Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government
What will be an ideal response?
Medicare reduces the price that the elderly people have to pay for health services, so that an increase in the subsidy will lead to an increase in the quantity demanded of health services. As a result, the government ends up paying more in total health care spending.
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When economists speak of the CPI bias, they are referring to
A) the tendency for the CPI to overstate price changes. B) the tendency for the CPI to understate price changes. C) the tendency for the CPI to understate inflation. D) errors in measuring the prices used in the CPI. E) the tendency for government officials to impose their values on the data.
Every spring, motorists do more driving than during the winter months. Every spring, the price of gasoline increases and the motorists buy more gasoline. This experience suggests that the
A) "law of supply" does not always hold for necessities like gasoline. B) "law of demand" does not always hold for necessities like gasoline. C) laws of supply and demand are both contradicted for gasoline, though only during the spring driving season. D) None of the above answers are correct.
All else equal and given the current system of exchange rates, if the United States enters a period of exceptionally strong growth,
A) the pressure on the dollar is to revalue. B) the pressure on the dollar is to devalue. C) the pressure on the dollar is to depreciate. D) the pressure on the dollar is to appreciate. E) Both A and D.
A tax multiplier equal to ?4.30 would imply that a $100 tax increase would lead to a:
a. $430 decline in real GDP. b. $430 increase in real GDP. c. 4.3 percent increase in real GDP. d. 4.3 percent decrease in real GDP. e. 43 percent decrease in real GDP.