2.2 "Supply-Side" Economics
What will be an ideal response?
After World War II, as noted, the debt generally declined as a percentage of GDP until 1980. The national debt was just over $900 billion in 1981, but rose by nearly $2 trillion during the next eight years. In other words, over those eight years the country incurred twice as much debt as it had in its first 200 years! How did this happen? Ronald Reagan's 1980 presidential campaign leaned heavily on the principles of "supplyside" economics, which promised that offering more benefits and incentivesto the individuals and groups that held the most wealth and productive capital would stimulate rapid investment growth and job creation. According to this principle, tax cuts would pay for themselves through greater revenues from an expanded economy.
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Which of the following is true?
a. If average total cost is less than marginal cost, then average total cost is decreasing. b. If average total cost exceeds marginal cost, then average total cost is decreasing. c. If average total cost exceeds marginal cost, then average total cost is increasing. d. If average total cost is less than marginal cost, then average total cost is constant.
Hospitals announce that there are not enough nurses available to keep them fully staffed. Economically speaking, what does this announcement mean?
A) The market wage for trained nurses is currently above the equilibrium wage. B) There is currently a surplus of nurses in this market. C) The market wage for nurses will eventually rise to the market clearing wage. D) The market will adjust very rapidly to correct this imbalance because anyone can be a nurse without any training.