1) A government program which reduced dollar welfare benefits to the poor equal
ID: 1120545 • Letter: 1
Question
1) A government program which reduced dollar welfare benefits to the poor equal to what the poor earned in the labor market would
Select one:
a. create incentives to work
b. eliminate poverty
c. be an example of the poverty trap
d. none of the above
2) A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
Select one:
a. the supply curve.
b. the demand curve, as consumers try to economize because of the shortage.
c. both the supply and demand curves.
d. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.
3) An economy starts with $10,000 in currency. All of this currency is deposited in a single commercial bank. The required reserve ratio is 20 percent. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is
Select one:
a. 4.
b. 10.00.
c. 5.
d. 40.
4) OPEC, the oil cartel in the 70's, trippled the price of crude oil within a two or three year period. The immediate reaction was an massive increase in oil revenue for the cartel but years later revenues fell below the level that prevailed before the price increase. This illustrates that
Select one:
a. elasticity tends to be smaller the longer consumers have a chance to adjust to price changes
b. elasticity tends to be smaller the larger the number of substitutes available for the good in question
c. elasticity tends to be larger the longer consumers have to adjust to price changes
d. elasticity is very small no matter what the time period
5) If the Central Bank (the FED) lowers the required reserve ratio,
Select one:
a. excess reserves in the banking system will be created and commercial banks can make more loans
b. excess reserves in the banking system will decline and commercial banks will be constrained to make fewer loans
c. it would be trying to reduce inflationary pressures on the economy
d. it would be trying to raise interest rates
Explanation / Answer
1. a. create incentives to work
A reduction in benefits would push the workers to work more and hence it creates incentive to work.
2. a. the supply curve.
Destruction of crop imply a negative supply shock. This would push the supply curve to the left and result in an higher price and quantity.
3. c. 5.
simply put, money multiplier = 1/(reserve ratio)
4. a. elasticity tends to be smaller the longer consumers have a chance to adjust to price changes
Smaller elasticity implies that the good is inelastic. In which case, the consumer must wait for long before it can find substitutes.
PS: According to chegg guidelines in event of multiple parts, only first four are attempted. However, you may repost the qsn asking for solution of specific questions/parts.
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