Explain why these data do not communicate whether the regulations outlined by the CAAA of 1990 are efficient.
According to the EPA’s prospective analysis of the 1990 to 2010 period, total social benefits (TSB) associated with the CAAA of 1990 are estimated at $690 billion ($1990) and the comparable total social cost (TSC) estimates are $180 billion ($1990).
Even though the estimated TSB associated with the CAAA of 1990 exceed the estimated TSC, there is no reason to assume that abatement controls are at their efficient level. Such an evaluation can be made only by finding out whether the marginal social benefit (MSB) equals the marginal social cost (MSC) at that point.
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During recessions, government expenditure automatically
A) rises because of programs such as unemployment insurance and Medicaid. B) falls because of programs such as unemployment insurance and Medicaid. C) falls because of the progressive income tax system. D) rises because of the progressive income tax system.
The expenditure multiplier is smallest when the
A) LM curve is positively sloped. B) LM curve is horizontal. C) IS curve is vertical. D) LM curve is vertical.