Pollution imposes costs on people and firms other than those involved in producing or consuming the product that produces pollution.

Which of the following fiscal policy actions would definitely cause a reduction in the size of an inflationary gap?

A) cuts in taxes and increases in government spending B) increases in government spending C) increases in taxes D) cuts in taxes

Which of the following statements is correct?

a. Compensating wage differentials reflect different skills of workers. b. Discrimination by employers affects the marginal productivity of workers. c. The signaling theory of education suggests that schooling does not affect worker productivity. d. The superstar phenomenon explains why more talented entertainers earn more than less talented entertainers.