Explain who gains and who loses from a tariff and why the losses exceed the gains
What will be an ideal response?
Domestic consumers lose consumer surplus from the tariff. Domestic producers gain producer surplus from the tariff. The government also gains revenue from the tariff. But the gain in producer surplus plus the gain in government revenue is less than the loss of consumer surplus, so on net a tariff creates a deadweight loss.
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Real business cycle theory argues that the primary cause of business cycles is fluctuations in
A) preferences. B) government spending. C) the importance of externalities. D) total factor productivity.
Which of the following is not true of a recession?
a. The economy is overheated. b. Cyclical unemployment is high. c. Unemployment is caused by insufficient spending. d. If the economy is in equilibrium, the aggregate expenditure line is too low to create an intersection at the full-employment level. e. If employers hired more workers to reduce unemployment, they would be unable to sell all the extra output those workers would produce.