Question

True/False 25% Indicate whether the statement is true or false 1 Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being Economists disagree on most economic issues facing an economy. 2. 3. Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation. The slope of a line with rise of five and run of two is positive. 4. 5. Slope will vary along a curve (as opposed to a straight line). -6. Scarcity is the fundamental problem of the economy. 7. Since it is a centrally planned economy, China does not face opportunity costs when economic decisions are made. 8. The negative slope of a production possibilities frontier is a graphic representation of opportunity cost A society which is inside its production possibilities frontier is efficient. --9. Only a market economy must answer the questions of what goods to produce, how to produce them, and for whom to produce them. 10. A demand schedule relates prices of a particular good to quantities demanded. 11. 12. A change in the income of buyers will normally change demand. 13. Even though prices may change frequently, they can be expected to gravitate toward equilibrium. A shortage occurs when price is higher than the market equilibrium. 14. 15. Enacting a law controlling rents near a major university will increase the affordable housing for college students. 16. Black-market prices are below equilibrium prices because sellers want to selllarge quantities. 17. A price ceiling is only effective if it is above the market equilibrium. Price ceilings set a legal maximum price on a product or commodity. 18.

Answer 1

1. False- sometimes, unemployment and inflation are long term welfare determinants. Unemployment can’t happen all at once in a single day. Same is the case with inflation. Inflation is caused by printing of more money by the Reserve Bank which takes time. It can’t be a short term process.

2. False- economists agree on various economic issues. Many economists have identified the problem of education and unemployment along with poverty in developing and underdeveloped countries and have worked for the same.

3. True- different individuals have different judgments of unemployment and inflation rate. A rich will have a different perspective on these as opposite to the poor.

4. True- slope of line with rise of five and run of two will be positive. Because rise is greater than run as given. Straight True.