Within the Keynesian aggregate expenditure-output model, if an economy operates below full employment:
A. a reduction in wage rates and resource prices will soon restore full-employment equilibrium.
B. a reduction in the real interest rate will soon restore full-employment equilibrium.
C. an increase in the real interest rate will soon restore full-employment equilibrium.
D. the economy may remain below full employment unless aggregate expenditures increase.
Answer: D
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If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.
Answer the following statement true (T) or false (F)
Compare two situations. (A ) A firm is not legally responsible for damages that result from air pollution caused by its production of steel. (B ) A firm is legally responsible for damages that result from its production of steel
Ronald Coase argued that if the property rights are assigned and transactions costs are low A) bargaining between the firm and the victims of the air pollution caused by the firm would lead to an equal reduction in pollution in situation (A ) and situation (B ). B) bargaining between the firm and the victims of the air pollution caused by the firm would lead to a greater reduction in pollution in situation (A ) than situation (B ). C) bargaining between the firm and the victims of the air pollution caused by the firm would lead to a smaller reduction in pollution in situation (A ) than situation (B ). D) bargaining between the firm and the victims of the air pollution caused by the firm will result in little reduction of pollution in either situation (A ) or (B ) because the firm has greater economic and political power than the victims.
Historically, real income per person:
A. barely changed at all until the 1800s but began to increase after. B. barely changed at all until the 1500s but began to increase after. C. has steadily increased at an average rate of 2 percent D. has barely changed at all worldwide.
One way insurance firms reduce moral hazard costs is by doing which of the following?
a. charging the buyer lower payments regardless of whether the buyer engages in risky behavior b. making buyers prove they will not engage in risky behavior before they may buy insurance c. charging the buyer higher payments regardless of whether the buyer engages in risky behavior d. making the buyer pays some of the costs in the form of deductibles and co-pays