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Suppose you know that the price elasticity of demand for good X has a value of 2. Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If price in this market
How does the problem of limited and bundled choice in the public sector relate to economic efficiency? Why are public bureaucracies alleged to be less efficient than private enterprises?
Why is it desirable for ceiling prices to be accompanied by government rationing? And for price floors to be accompanied by programs that purchase surpluses, restrict output, or increase demand?
You win a lottery with a prize of $1.5 million. Unfortunately, the prize is paid in 10 annual installments. The first payment is next year. How much is the prize really worth? The discount rate is 8%.
Economists often stress that congestion helps account for the law of the diminishing returns.With this in mind, list and explain related increasing costs caused by traffic jam in Ho Chi Minh City, Vie
Why do some stores offer senior citizen discounts on Tuesdays? Senior citizens have perfectly inelastic demand curves, whereas other shoppers do not.
A country recently passed a food stamp legislation. Qualified households are given food stamps, which can be used to purchase foods, but they cannot legally re-sell the food stamps
Consider the following statement: “Because deficit reduction is costly to the economy, governments should never run budget deficits.”Do you agree with this statement? Briefly explain.
The budget deficit projections in this chapter include net interest on the debt, which depends on interest rates. Use the loanable funds model to explain what is likely to happen to interest rates and
Studies have shown a link between rising debt-to- GDP ratios and real interest rates. Investment is not the only category of spending that might be sensitive to interest rates.
How might budget deficits affect long-term economic growth?
Suppose that a country has a debt-to-GDP ratio of 64%. The growth rate of real GDP is 3%. Assume that seignior age is zero and the real interest rate is 2%.What primary deficit as a percentage of GDP
Unemployment in the labor market is increased by forces that keep wages from falling to the equilibrium level. Other than efficiency wages, unionism, and minimum wages, what other factors might cause
Given this information, was Japanese fiscal policy sustainable? If not, what would the primary budget deficit have to be to make fiscal policy sustainable?
What are the consequences of having a fiscal policy that is not sustainable?
Some economists studying the effects of the minimum wage law have found that it tends to reduce the employment of black teenagers relative to white teenagers. Briefly explain the economics behind this
Minimum wage laws are controversial for many reasons. One is that they may not be beneficial to the workers that they are most intended to help.
In 1914, Ford Motor Company doubled its wage to $5 per day, a rate that was considerably above the average wage at that time.In terms of efficiency wages, explain why Ford would have had an incentive
Assume that the government imposes a $20 minimum wage. Find the new quantity of labor demanded and supplied.
What is an efficiency wage, and how do efficiency wages affect the labor market?
How would you expect each of the following factors to affect the natural rate of unemployment?There is an increase in the rate of technological change
Draw a graph of the aggregate labor market in equilibrium. Then consider each of the following scenarios. In each case, show the effect on the market and explain what will happen to the real wage and
Suppose that workers become concerned about the future and therefore wish to increase their hours of work relative to leisure. At the same time, there is an increase in the capital stock, making worke
When the economy is at full employment, are all workers employed? Briefly explain.
Increases in structural unemployment can result from a recession but are more commonly associated with other changes, such as the development of new products that replace old products.