Answer the following statements true (T) or false (F)
1. Higher price levels are associated with lower aggregate expenditure at every level of income.
2. The classical economists held that chronic unemployment was likely.
3. According to the classical economists, demand creates its own supply.
4. Keynes suggested that Say’s Law did not apply to a monetary economy because many individuals hold money as saving instead of spending it.
5. Keynes stated that equilibrium could exist at any level of employment or unemployment.
1. TRUE
2. FALSE
3. FALSE
4. TRUE
5. TRUE
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This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope.
A state initiative requiring towns to spend at least $20 per day on litter removal would be ________ because ________.
A. efficient; it solves the inefficiency created by the negative externality B. efficient; reducing litter is socially optimal C. inefficient; the marginal cost of litter removal would exceed the marginal benefit D. inefficient; $20 is insufficient to remove all of the litter
If Fredonia has a closed economy, it ________ with other countries.
A. does not negotiate B. does not trade C. trades D. prevents its citizens from traveling to other countries but trades