In the classical model, government purchases or tax cuts are appropriate policies to
raise GDP.
The free rider problem occurs when
Less-risky professions tend to enjoy compensating wage differentials.
A contract
One factor that might lead to reduced trade or incomplete specialization is
a. absolute advantage
b. comparative advantage
c. government-enacted barriers to trade
d. constant opportunity cost
e. decreasing opportunity cost
Figure 4-4 depicts a market in which the government has imposed a price floor of
$5.00 per unit. To maintain the price floor, the government should
The increase in world oil prices in 1990 initially
a. caused the AS curve to shift upward as wage rates quickly adjusted
b. increased the level of GDP associated with high price levels
c. shifted the aggregate expenditure line upward
d. caused the AS curve to shift upward due to higher costs per unit of output
e. caused the AD curve to shift leftward due to an increasing interest rate
When Brenda was in college, she worked part-time delivering pizzas and she ate five
boxes of macaroni and cheese per week. After graduation, she became a high school
teacher and ate only two boxes of macaroni and cheese per week. From this
information,
Tax avoidance reduces the federal government’s revenue flow.
The desire for goods and services is
a. created by a market economy
b. the ultimate explanation for all production
c. why it is so difficult to explain how our economy works
d. the cause of inflation
e. what causes the market wage for labor to continually increase
If a life can be saved for $250 using Method A and $260 using Method B,
The fact that travel on buses fell as incomes increased in many cities suggests that
If a change in real GDP causes the price level to change, there will be a movement
along the aggregate supply curve.
An economic expansion reflects
a. any movement from disequilibrium to a new equilibrium
b. the increase in output and decrease in employment level following a recession
c. the increase in output and employment levels following a recession
d. the rising wage rates that follow economic instability
e. instability in government tax revenues.
Samantha has been working for a law firm and earning an annual salary of $90,000. She
decides to open her own practice. Her annual expenses will include $15,000 for office
rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a
$35,000 salary for a secretary/bookkeeper. Samantha will cover her start-up expenses
by cashing in a $20,000 certificate of deposit on which she was earning annual interest
of $1,000. Assuming that there are no additional expenses, Samantha’s total annual cost
of production will equal