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CGE Homework #5

CGE Homework #5

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Published by Katherine Sauer

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Published by: Katherine Sauer on Jun 26, 2012
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11/13/2012

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 Name: ____________________________________________ Economics
 – 
Dr. Sauer 
Homework #5 (40 points)
????Add in world market questions??? And inelastic supply questions??? More questions about the podcasts themselves.
Please indicate your answers on a scantron sheet. It is okay to work on your homework in groups, but each person must submit answers individually.
1. TRUE or FALSE The fundamental disagreement between Keynes and Hayek has to do with to what extent thegovernment can and should steer the economy.2. Which of the following would Keynes likely NOT agree with?a. When the economy is not doing well, the government should stimulate it using fiscal or monetary policy.b. Aggregate Demand is comprised of spending by households, business investment by firms, and spending bythe government.c. The market does not need government intervention.d. A war can stimulate an economy because government spending increases.
3. TRUE or FALSE Keynes’ th
eory on government and the economy is the correct one.4. Which of the following would Hayek likely agree with?a. When the economy is not doing well, the government should stimulate it using fiscal or monetary policy.b. Inflation is not to be worried about in the short run.c. Over-consumption is what leads an economy into trouble.d. When the government tries to steer markets, things get worse.5. Which of the following transactions does not take place in the markets for factors of production in the circular-flowdiagram?a. a landowner leases land to a farmerb. a farmer hires a teenager to help with harvestc. a construction company rents trucks for its businessd. a woman buys corn for dinner6. A model that shows how dollars, inputs, and outputs flow through markets among households and firms is called thea. aggregate demand and aggregate supply diagram.b. circular-flow diagram.c. demand and supply diagram.d. comparative advantage model.7. TRUE or FALSE Aggregate Demand comes from household spending, firm investment spending, government spending,and net exports.8. TRUE or FALSE Aggregate Supply will increase (shift to the right) when the price of oil rises.9. Suppose that there is a stock market crash and many individuals lose money and firms are not in a position to undertakecapital investment. According to the model of Aggregate Supply and Demand we would expecta. higher inflation and higher unemployment.b. higher inflation and lower unemployment.c. lower inflation and higher unemployment.d. lower inflation and lower unemployment.10. Suppose that unemployment is high, inflation is low, and a national election is near. We might expecta. the Fed will raise interest rates to stimulate the economy.b. Congress will lower taxes to stimulate the economy.c. the Fed will lower taxes to stimulate the economy.d. Congress will lower interest rates to stimulate the economy.11. TRUE or FALSE The rice panic was due to a physical shortage of rice in the world.12. The key to stopping the rice panic wasa. increasing the production of rice.
 
 
 b. managing people’s expectations.
 c. implementing controls on the price of rice.d. rationing rice.13. TRUE or FALSE Governments intervening in the rice markets will likely prevent another rice fiasco.14. A price ceiling on avocados would have the effects of a. lowering the price of avocados and causing a shortage.b. lowering the price of avocados and causing a surplus.c. raising the price of avocados and causing a shortage.d. raising the price of avocados and causing a surplus.15. TRUE or FALSE Economists are generally not in favor of price controls.16. Which of the following is the most likely explanation for the imposition of a price floor on the market for corn?a. Policymakers have studied the effects of the price floor carefully, and they recognize that the price floor isadvantageous for society as a whole.b. Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressuredpolicy makers into imposing the price floor.c. Buyers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing theprice floor.d. Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing theprice floor.__________________________________________________________________________________________________17.
Refer to the graph
.18.
Refer to the graph above
. For a price ceiling to be effective in this market, it would have to be set ata. any price below $10.b. a price between $6 and $10.c. a price between $10 and $16.d. any price above $10.___________________________________________________________________________________________________19. The minimum wage is an example of aa. price ceiling.b. price floor.c. wage subsidy.d. tax.20. A minimum wage that is set above a market's equilibrium wage will result in an excessa. demand for labor, that is, unemployment.b. demand for labor, that is, a shortage of workers.c. supply of labor, that is, unemployment.d. supply of labor, that is, a shortage of workers.21. TRUE or FALSE Economists agree that economic growth is destroying the world.
DemandSupply2 4 6 8 10 12 14 16 18 20
Quantity
2468101214161820
Price
Which of the following statements is not correct?a. When the price is $10, quantity supplied equals quantitydemanded.b. When the price is $6, there is a surplus of 8 units.c. When the price is $12, there is a surplus of 4 units.d. When the price is $16, quantity supplied exceeds quantitydemanded by 12 units.
 
 22.
Refer to the graph
.The industry createsa. positive externalities.b. negative externalities.c. no externalities.d. no equilibrium in the market.23.
Refer to the graph above
. Without any government intervention, the equilibrium price and quantity area. $1.90 and 38 units, respectively.b. $1.80 and 35 units, respectively.c. $1.60 and 42 units, respectively.d. $1.35 and 58 units, respectively.24.
Refer to the graph above
. The socially optimal price and quantity area. $1.90 and 38 units, respectively.b. $1.80 and 35 units, respectively.c. $1.60 and 42 units, respectively.d. $1.35 and 58 units, respectively._______________________________________________________________________________________________25.
Refer to the graph below.
To internalize the externality in this market, thegovernment shoulda. impose a tax on this product.b. provide a subsidy for this product.c. forbid production.d. produce the product itself.

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