ECON 100-2
If a market basket cost $100 last year and $110 this year, we can conclude that the inflation rate is:
10%.
If there are 11,000 people employed, 2,500 people unemployed, and 3,000 people who are not in the labor force, what is the unemployment rate?
18.5% (2500 / 1100+2500)
Fiscal policy dominated economic debate in the:
1960s
The Full Employment and Balanced Growth Act of 1978 established a goal for price stability to be an inflation rate less than:
3%
Economists agree that the optimal unemployment (full employment) is
4-6%
If 150,000 people are employed and the labor force is 160,000 the unemployment rate is:
6.25%
Which of the following goods would be considered a private good?
A doughnut
Which of the following is an example of the provision of a public good by the government?
A fireworks display at your local city park on the 4th of July
The result of a natural disaster such as a hurricane that significantly interrupts the ability of firms to provide goods and services to the economy at any price will likely cause:
An increase in the price level
... is a type of government intervention intended to alter market structure or prevent abuse of market power.
Antitrust
Which of the following goods are excludable?
Big-Macs A personal global positioning system (gps) Concert tickets
Market based environmental policy involves removing the gap between ... cost and ... cost.
Blank 1: private Blank 2: social
Which of the following is an example of the provision of a public good by the government?
Building dams and levies to prevent floods
Changes in which of the following can shift the aggregate demand curve?
Changes in consumer income taxes Changes in consumer wealth
Which of the following are determinants of aggregate supply?
Changes in infrastructure (like transportation systems) Changes in essential input prices (like for oil) Changes in business taxes
Which of the following are identified as policy levers?
Changes in the interest rate Tax policy Regulations Government spending
According to what theory does the economy "self-adjust"?
Classical
A measure of changes in the average price of consumer goods and services is called the:
Consumer Price Index
... unemployment occurs when equilibrium GDP is less than full employment GDP.
Cyclical
Since 1946, the recession that had the greatest decline in output started in
December 2007
Which type of policy prevailed during the 2000s?
Eclectic policy
True or false: Economists continue to develop policy tools for taming the business cycle and can now eliminate the possibility of a recession.
F
True or false: Inflation always makes people worse off.
F
True or false: Macro equilibrium and full-employment GDP are always equal.
F
True or false: The growth path of the U.S. economy can be characterized as a smooth, rising trend.
F
Externalities can exist with only consumption decisions.
False
Which type of policy prevailed during President Obama's term in office?
Fiscal policy
Which of the following is not considered to be a determinant of macro performance:
GDP per capita
Which type of policy prevailed in the United States during the early 1990s?
Hands-off policy
Which of the following are examples of markets that are more likely to experience external benefits?
Immunizations Health care Education
Which three of the following are the redistributive mechanics of inflation?
Income effects Wealth effects Price effects
... is an increase in the average level of prices of goods and services.
Inflation
... is not representative of the price changes in any particular
Inflation
Since 1946, the recession that had the highest unemployment started in
July 1981
Inherent market instability is most closely connected to which economic theory?
Keynesian
_____ theory, where government spending or tax cuts are used to stimulate the economy, is the most prominent of the demand-side theories.
Keynesian
_______ define our nation's economic welfare.
Macro outcomes
_______ is the study of aggregate economic behavior, of the economy as a whole.
Macroeconomics
Which of the following justifies government intervention in the economy?
Market failures
Which of the following exemplifies a good that cannot be jointly consumed?
Mary drinks a can of Pepsi. John eats an apple for lunch.
Which type of policy prevailed during the 1970s?
Monetary policy
_______ refers to the use of money and interest rates to alter macroeconomic outcomes.
Monetary policy
_____ is the demand-side theory that emphasizes the need for money and credit for financing spending.
Monetary theory
Which of the following occurs when the optimal output is less than the market output?
Negative externality
What are the basic "lessons learned" about the redistributive effects of price changes?
Not all prices rise at the same rate during an inflation. Not everyone suffers equally from inflation.
Which of the following are examples of goods or services exhibiting external benefits?
Preschool education Vaccinations
Which of the following explains the reason for the upward-sloping aggregate supply curve in the short run?
Producers charge higher prices to recover higher costs with increased capacity utilization.
When the government intervenes in the macro economy one of its goals is:
Promote economic growth
Which one of the following examples exemplifies a private good?
Purchasing the last in-stock cell phone at the wireless cell phone store.
... GDP, or inflation-adjusted GDP, reflects changes in the price level.
Real
_______ is calculated as the percentage change in real GDP per year.
Real GDP growth
Based on the figure showing real GDP growth, which of the following statements best summarizes the real GDP economic growth in the U.S. between 1929 and 2019?
Real GDP has increased at approximately 3% yearly.
Which two of the following are ways for the government to correct for external costs?
Regulations Emission fees
... prices may be changing when we have stable prices, inflation, or deflation.
Relative
Which of these types of unemployment may still exist when the economy is at full employment (select all that apply)?
Structural unemployment Seasonal unemployment Frictional unemployment
The mechanisms for shifting the aggregate supply curve in the desired direction are the focus of
Supply-side theories
True or false: The Classical Theorists believe that the economy is inherently stable.
T
True or false: The Great Depression impacted many countries around the world.
T
True or false: The Great Depression was a stunning blow to Classical Theory.
T
True or false: business cycles are likely to result from recurrent shifts of the aggregate supply and demand curves.
T
______ are the principal mechanisms to redistribute income in the United States.
Taxes and transfers
Which of the following are examples of antitrust policy in the U.S.?
The Sherman Act (1890) The Clayton Act (1914) The Federal Trade Commission Act (1914)
When a market experiences an external benefit, which of the following is true?
The market output is less than the optimal output. The social demand for the good causing the externality is above the market demand.
If the price of tuition does in fact rise faster than all other prices, which of the following is true?
The nominal income of colleges and universities will rise.
If the price of tuition does in fact rise faster than all other prices, which of the following is true?
The real income of college students will fall relative to that of nonstudents (assuming constant nominal incomes).
If the price of tuition does in fact rise faster than all other prices, which of the following is true?
The real income of nonstudents will rise relative to that of students (assuming constant nominal incomes).
... is the inability of labor force participants to find
Unemployment
A business cycle is:
a alternation between economic upturns and downturns
The real balances effect can be defined as:
a higher price level reduces the purchasing power of the public's accumulated savings balances.
An imperfection in the market mechanism that prevents optimal outcomes is called:
a market failure
If the forces of supply and demand have not led us to the best point on the production possibilities curve, then the market system is experiencing
a market failure
Which of the following are examples of substituting external cost for private cost?
abandoning an old car on the street throwing trash out a car window
When positive external benefits occur, the social demand curve lies ... the market demand curve.
above or right
A schedule or curve that shows the total quantity of output (real GDP) demanded at alternative price levels in a given time period, ceteris paribus is called:
aggregate demand
The macro equilibrium occurs where:
aggregate demand equals aggregate supply
When the price level is lower than macro equilibrium
aggregate demand is greater than aggregate supply
The idea that some costs of production rise when output is increased helps explain why the
aggregate supply curve is upward sloping.
A fee imposed on polluters, based on the quantity of pollution is
an emission charge
A power plant creating air pollution is an example of:
an externality created by production
The aggregate demand curve slopes downward because it reflects:
an inverse relationship between the price level and the amount of real output (GDP) demanded
An increase in asset values that results in an increase in consumer spending is called the real ______ effect.
balances
A basic purpose of macroeconomic theory is to explain the ... cycle.
business
The determinants of aggregate supply (such as natural disasters, changes in tax policy, etc.) are variables that:
cause the aggregate supply curve to shift
During the Great Depression, the ... self-adjustment mechanism simply did not work.
classical
Which of the following goods could be classified as nonexcludable (no exclusion)?
cleaner air county roads
The ... price index measures the changes in the average price of consumer goods and services.
consumer
Real gross domestic product (GDP) is a measure of GDP that:
controls for prices changes
When the macro equilibrium GDP is less than full employment GDP the resulting unemployment is:
cyclical
A worker who is unemployed because of an economy-wide insufficient demand for goods and services is experiencing:
cyclical unemployment
Changes in unemployment that occur as the economy expands and contracts is
cyclical unemployment
The increase in unemployment that occurs during recessions and depressions is called:
cyclical unemployment
When interest rates are higher, businesses and consumers will
decrease their demand for loans
All else equal, a decrease in aggregate demand, assuming constant aggregate supply, will cause a(n) _______ in the price level and a(n) _______ in real output.
decrease; decrease
Keynes argued that a(n) _________ in aggregate spending would tend to depress the economy.
deficiency
... occurs when there is a decreasing average price level.
deflation
Aggregate ... is a schedule or curve that shows the total quantity of output (real GDP) demanded at alternative price levels in a given time period, ceteris paribus.
demand
Keynesian theory is categorized as a _______ theory.
demand-side
Monetary theory is categorized as a(n) _____ theory.
demand-side
The labor force is comprised of people who are:
employed and unemployed actively seeking employment
The labor force is the sum of the ______ and ______.
employed; unemployed
The macro failure of unstable outcomes means that
even if the designated macro equilibrium is optimal, it may be displaced by macro disturbances.
Since the quality of products tends to increase over time, increases in the price of a product may tend to ... the true rate of inflation.
exaggerate or overstate
The ... characteristic of a private good is the ability of a seller to prevent people who did not pay for a product from obtaining its benefits.
excludability, excludable, exclusion, or exclude
A basic purpose of macroeconomic theory is to explain the business cycle -- to identify the forces that cause the overall economy to _______ and _______.
expand; contract
Water and air pollution both result in a market failure known as a(n)
external cost
An ... (one word) is a cost or a benefit accruing to an individual or a group, a third party, that is external to a market transaction.
externality
A market ... implies that the forces of supply and demand have not led us to the best point on the production possibilities curve.
failure
When the US price level rises relative to foreign price levels, US exports will ______ and US imports will ______.
fall; rise
Two examples of government corrections for underproduction in a market that generates external benefits are:
financial aid providing education budgets
Which of the following effects help explain why the aggregate demand curve is downward sloping?
foreign trade effect real balances effect interest rate effect
The situation when people can receive the benefits from a good without having to pay for it is called the ...-rider problem.
free
The ______ problem makes it difficult to determine the true demand for a good.
free-rider
The situation occurring when people can receive the benefits from a good without having to pay for it is known as the ______ problem.
free-rider
Because of ... unemployment people who spend more time looking for work may find better jobs.
frictional
Brief periods of unemployment experienced by people moving between jobs or into the labor market is called ... unemployment.
frictional
Workers who are unemployed because they are "between jobs" are part of:
frictional unemployment
The type of unemployment that consists of workers searching or waiting for jobs is called ______. The unemployment that consists of workers who lack marketable skills or must relocate is called _______. The type of unemployment that is caused by a decline in total spending is called ______.
frictional; structural; cyclical
A new college grad is looking for their first job and is currently unemployed. This grad is ________ unemployed.
frictionally
Jose quit his current job and has taken a new job at a higher pay. The new job starts in two weeks. During the two weeks between jobs, Jose is _____ unemployed.
frictionally
A unemployment rate between 4-6% is known as ... employment.
full, optimal, or optimum
When government intervention fails to correct market failure, the result is
government failure.
Market failures can be used to justify:
government intervention in the economy
Fiscal policy is the use of _______ to alter macroeconomic outcomes.
government taxes and spending
If the price level is higher than the equilibrium price level, the aggregate quantity supplied will be _____ the aggregate quantity demanded.
greater than
The dollar value of all the output produced in a year is
gross domestic product
Based on the table U.S. real GDP growth:
grows erratically but averages an 3% annual growth rate
Market power can result in ... prices to consumers, enriching the firm.
higher, increased, increase, raise, raised, or high
Due to the free rider dilemma, some parts of society will conceal their desire for a public good. Identify these parts of society.
households firms individuals
An important controversy between Classical and Keynesian economists is:
if market economies are stable or unstable
Nominal GDP measures the value of all goods and services:
in current prices
Social Security, Medicare, and Food stamps are all examples of
income transfers
Along the aggregate supply curve, if the price level increases, then output will
increase
When price levels fall, the quantity of real output demanded will _______.
increase
An increase in the price of oil due to a conflict will ______ per-unit production costs and shift the aggregate supply curve to the ______.
increase; left
Along the aggregate supply curve, output increases when the price level
increases
The foreign trade effect is when the US price level (increases/decrreases) relative to foreign price levels and the quantity of US goods demanded as net exports decreases.
increases
The interest-rate effect is when a higher price level ...(increases/decreases) the demand for borrowing and increases the interest rate, assuming a fixed money supply.
increases
Which is not one of the three government policy options to combat business cycles?
increasing prices
Environmental policy is designed to eliminate the gap between private costs and social costs. An emissions charge can be used to close this gap by _______ private marginal costs and thus encouraging _______ output.
increasing; lower
The market mechanism may make some people rich while leaving others poor. If such outcomes violate our vision of fairness, we say this is the market failure of:
inequity
The four specific sources of microeconomic market failure are:
inequity market power public goods externalities
When the market does not distribute output in a fair way, we say this is the market failure of:
inequity.
Economists believe there may be a trade-off between
inflation and unemployment
The idea that even if the designated macro equilibrium is optimal, it may not last long is the problem of _______. The equilibrium price or output level may not satisfy our macroeconomic goals is the problem of _______.
instability; undesirability
The aggregate demand curve slopes downward because the relationship between the price level and real output is:
inverse
Because of the Classical economists belief that the economy self-adjusts, they assert that government intervention
is unnecessary
The _______ consists of everyone over the age of 16 who is employed and unemployed.
labor force
When positive external benefits occur, the market demand curve lies to the ______ of, or ______ the social demand curve.
left; below
An emission charge increases private marginal cost and _______ output. Multiple choice question. raises
lowers
The combination of price level and real output where aggregate demand equals aggregate supply is known as:
macro equilibrium
Output, growth, jobs are among the _______ that define our nation's economic welfare.
macro outcomes
The study of aggregate economic behavior is
macroeconomics
The study of the economy as a whole is
macroeconomics
In most conditions, the ... mechanism ensures that the right amount of a particular product gets produced.
market
The ... mechanism is the use of market prices and sales to signal desired outputs (or resource allocations).
market
The four specific sources of ... failure are public goods, market power, externalities, and inequity.
market
The ______ curve for a good that generates external costs reflects only the direct private benefit to the individuals who consume the product.
market demand
Social demand is equal to
market demand plus externalities
When market forces fail to produce an optimal mix of output it is known as
market failure
The idea that small disturbances in output, prices, or unemployment are likely to be magnified, not muted, by the invisible hand of the marketplace is describing
market instability
In most conditions, the _____ ensures that the right amount of a particular product gets produced
market mechanism
Firms tend to
maximize profit
Inflation:
might make some people better off
A demand-side theory that emphasizes the role of money in financing aggregate demand is known as:
monetary theory
The intensity and duration of the decline in GDP during the Great Depression was ______ more recent U. S. recessions.
more severe than
Business cycles are:
movements of GDP above or below the long-run growth trends
If the optimal output is less than the market output, then we can conclude that a ... externality exists.
negative
When producers intentionally or unintentionally pass some of the costs of production onto the community, the good causes ______ externalities to occur.
negative
Emission fees and regulations are two ways government can correct for:
negative externalities/external costs
A ______ is a market failure that occurs when a third party to a transaction experiences uncompensated costs.
negative externality
... products are often slow to be included in the consumer price index (CPI) and when omitted tend to cause the CPI to be overstated.
new
On average people are _______ when prices rise because average incomes increase at the same time.
no worse off
Income expressed in current year dollars is known as ... income.
nominal
When computing GDP using current prices, it is referred to as
nominal GDP
When there is no effective way of keeping individuals from the benefit of a good once it is produced, the good is
non-excludable
One of the reasons that inflation redistributes real income is:
not all prices rise the same during inflation
Unstable outcomes mean that
once AD and AS reach the full-employment equilibrium, shifts of AD and AS can move the economy away from that equilibrium.
The most desirable combination of output attainable with existing resources, technology, and social values is called the:
optimal mix of output
The most desirable combination of output attainable with existing resources, technology, and social values is the ______ mix of output and the combination of output produced by supply and demand forces is the _______ mix of output.
optimal; market
Recessions are periods when:
output falls for at least 2 consecutive quarters
Since production possibilities always tend to expand:
output may actually decline
Goods that have external costs result in a(n) ______ of the good.
overproduction
The omission of new products makes the consumer price index (CPI):
overstate the effects of inflation
The business cycle high point that precedes a recession is called a(n)
peak
Economic performance (as measured by real GDP) is at its maximum during a _______ and at a minimum during a _______.
peak; trough
The inflation rate can be measured by the ... increase in the CPI
percentage or percent
The historical growth path of the U.S. economy can be characterized as:
periods of expansion followed by contraction
People tend to maximize their _______, balancing private benefits against private costs.
personal welfare
Which of the following are not basic macro outcomes?
policy levers internal market forces external shocks
Aggregate supply is represented as a schedule or curve showing the relationship between the ... level and the amount output produced in the economy.
price
The absence of significant changes in the average price level, officially defined as a rate of inflation of less than 3 percent, is the United States goal of
price stability
The goals of macro intervention are
price stability full employment growth
The costs of an economic activity directly borne by the producer (excluding externalities) is known as ... costs.
private
Environmental policy is designed to eliminate the gap between _______. An emissions charge can be used to close this gap by increasing private marginal costs and thus encouraging reduced output.
private costs and social costs
When your purchase (and consumption) of a good makes it's purchase (and consumption) by another person impossible, the good is said to be a:
private good
People tend to maximize their personal welfare, balancing _______ benefits against _______ costs.
private; private
The alternative combinations of goods and services that could be produced in a given time period with all available resources and technology is known as ... possibilities.
production
An economy's potential output is reflected in its _______ curve.
production possibilities
The alternative combinations of goods and services that could be produced in a given time period with all available resources and technology is known as
production possibilities
Economists use the _______ curve to identify an economy's potential output.
production possibility
A good is known as a ... good if one person's consumption of the good does not preclude consumption of the same good by others.
public
Within reason, everyone can benefit from ______ goods and there is no effective way of excluding individuals from the benefits derived from them once they exist.
public
National defense and street lighting are examples of
public goods
In general, the consumer price index (CPI) only monitors the price of goods over time. It usually does not adjust for changes in ...
quality
Regulation ... the cost of production because the firms must, as one example, operate and maintain pollution control equipment.
raises or increases
Income that has been adjusted for changes in prices over time is called:
real income
Inflation redistributes:
real income
The phase of the business cycle that describes a decline in total output for at least two consecutive quarters is called a(n) ...
recession
One of the biggest consequences of unanticipated inflation is
redistributions where some are better off and others are worse off
Businesses and consumers will ... their demand for loans when interest rates are higher.
reduce
The price of one good in comparison with the price of other goods is a ... price.
relative
If you consume goods and services whose prices are rising slower than inflation, compared to the average person, you are:
relatively better off
If you consume goods and services whose prices are rising faster than inflation, compared to the average person, you are:
relatively worse off
Given aggregate demand, if the aggregate supply curve shifts to the left, the price level will _______ and output will _______. Multiple choice question. rise; fall
rise; fall
If prices are rising, incomes are usually ... , too.
rising
Farm workers who find their jobs ending at the end of a crop year are said to experience ... unemployment.
seasonal
Unemployment due to seasonal changes in employment or labor supply is called _______ unemployment.
seasonal
We cannot have zero unemployment since the following types of unemployment are both inevitable and desiredable:
seasonal frictional structural
Snow skiing instructors who find their jobs ending at the end of the winter are are said to experience ... unemployment.
seasonal or seasonally
Aggregate supply and demand curves provide a convenient framework for comparing theories on how the economy works. Macro controversies focus on the _______ of aggregate supply and demand curves and the potential to _______.
shape; shift them
President Trump's 2017 tax cut was primarily designed to:
shift AS to the right
An increase in producer taxes will cause the aggregate supply curve to _______.
shift to the left
Business cycles are likely to result from recurrent ... of the aggregate supply and demand curves.
shifts
When the price level is below macro equilibrium _______ would emerge and sellers would _______.
shortages; raise their prices
The full resource costs of an economic activity, including externalities is known as ... costs.
social
Market demand plus externalities is
social demand
External costs equal _______ costs minus _______ costs.
social; private
If society wants a public good:
society will have to direct government to provide it
If relative prices are changing, we can definitely state that:
some prices may be rising and some may be falling
Full employment is something less than 100 percent employment of the labor force because:
some seasonal, frictional, and structural unemployment is both inevitable and desirable
According to classical economics, the economy is inherently _______ due to flexible wages and flexible prices.
stable
Unemployment caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs is called ... (Enter one word) unemployment.
structural
A glass blower who is unemployed because her skills are no longer marketable due to automation is an example of ______.
structural unemployment
An auto worker in Michigan who loses her job because the company relocated the plant to another country is an example of:
structural unemployment
The unemployment that is due to the mismatch between the skills needed for emerging jobs and those possessed by the workforce is called:
structural unemployment
Government can attempt to correct a market experiencing a external benefits by directly producing the good, or by ______ producers and/or consumers of the good.
subsidizing
When you litter you are:
substituting an external cost for a private one
Aggregate _______ can be represented as a schedule or curve showing the relationship between the price level and the amount of real output that is produced in a given time period.
supply
Much of President Trump's policy preferences (deregulation and tax cut to encourage production) can be considered ______ economic policies.
supply-side
When a failure to achieve full employment results from the unwillingness of producers to provide more goods at existing prices _______ economic theories are often implemented.
supply-side
Which type of policy prevailed during the 1980s
supply-side
Supply-side policy is the use of _______ in order to increase the ability and willingness to produce goods and services.
tax rates and regulation
Government can finance the provision of public goods through ...
taxation, taxes, or tax
If a firm was using a more expensive producion process that reduces pollution, then
the average total cost curve would shift upward the marginal cost curve would shift upward
Inflation refers to:
the change in the average level of prices
Laissez faire is
the doctrine of "leave it alone," of nonintervention by government in the market mechanism
The intersection of the aggregate demand and the aggregate supply curves determines
the equilibrium price level and the equilibrium real GDP.
Regulation of pollution raise the cost of production because:
the firms must purchase, operate and maintain pollution control equipment
The annual percentage rate of increase in the average price level is called:
the inflation rate
The annual rate of increase in the average price level is called:
the inflation rate
The unemployment rate is the proportion of _______ that is unemployed.
the labor force
When positive external benefits occur:
the market demand curve lies to the left of, or below, the social demand curve
Keynesian economists believe which of the following;
the market is inherently unstable government intervention is necessary
Real GDP growth is calculated as:
the percentage change in real GDP per year
Real income is:
the purchasing power of money
One of the consequences of inflation is:
the redistribution of income and wealth.
Because of the Classical economists belief that the economy self-adjusts, they assert that
there is no need for government macro intervention
An externality causes some of the benefits or costs of a market activity to be passed on to a:
third party
The direct way to reduce negative externalities from a certain activity is:
to pass regulations limiting that activity
Relative price changes are important:
to the market mechanism
Whenever external costs exist, market demand will be _____ of social demand.
to the right
Keynes argued that a recession might result from which of the following:
too little spending
When external costs exist, the market will produce goods and services that generate _____ pollution, creating a market failure.
too much
Which of the following are external costs associated with market activities?
traffic congestion pollution
The government alters the distribution of income with taxes and
transfer payments.
The lowest point on the business cycle that precedes an expansion is called a
trough
As average price levels change, economic decisions become more:
uncertain
If price levels are rising rapidly and erratically, you may not commit to long term commitments because of
uncertainty about future costs.
The market tends to _______ public goods and _______ private goods.
underproduce; overproduce
The market will _______ goods that yield external benefits and _______ those that generate external costs.
underproduce; overproduce
Because the link between paying and consuming is broken when it comes to public goods, people are reluctant to buy what they can get free. Thus, if public goods were marketed like private goods, the end result might likely be a(n) _______ of public services.
underproduction
If public goods were marketed like private goods, there would be an _______ of public goods.
underproduction
The portion of the labor force that is not working but is willing and able to work and actively seeking work is defined as ______ and the portion of the labor force that is working part-time or full-time is defined as ______.
unemployed; employed
A restraint in government spending to maintain price stability may result in
unemployment
The three basic measures of macro performance are
unemployment output (GDP) growth inflation
Examples of income transfers include:
unemployment compensation welfare payments social security benefits
The _______ is the proportion of the labor force that is unemployed.
unemployment rate
The number of people unemployed divided by the labor force is the:
unemployment rate
According to Keynesian economic theory, the economy is inherently _______ and therefore requires _______.
unstable; government intervention
Frictional unemployment is inevitable and is often viewed as desirable because many workers:
voluntarily moving between jobs may lead to a better job
If due to inflation the real value of your savings makes you worse off than you were before, this is an example of the ... effect
wealth
Whenever external costs exist, a private firm
will not allocate its resources and operate its plant in such a way as to maximize social welfare.
When production possibilities increase, output will:
will sometimes actually contract
Is there another recession coming for the U.S. economy?
yes, but the timing is unpredictable
