quiz 2

Question 1

The elasticity of labor supply – i.e., the percent change of labor supplied due to a percent change in wages – tends to be:

Answer 1

Between 0 and 1

Question 2

Consider the following statements: (1) While life expectancy in the US is positively correlated with household income, this relationship has become weaker in the last decade. (2) The concept of adverse selection illustrates that asymmetric information can lead to market failure, in particular in the market for health insurance.

Answers:
a.
Both statements are correct.

b.
Both statements are incorrect.

c.
Statement (1) is correct but (2) is not.

d. Statement (2) is correct but (1) is not.

Answer 2

Statement (2) is correct but (1) is not.

Question 3

According to the AS-AD model, which of the following statements is true?

a.
The “potential output” can be directly influenced by monetary policy.

b.
An increase in the supply of money reduces aggregate demand (AD curve).

c.
The invention of new technologies that increase productivity reduces an economy’s “potential output”.

d.
An increase in consumer confidence tends to lead to an increase in GDP and an increase in the price level.