Category: Economics

➤ Why can’t normative statements be proven true or false using data?
Normative claims depend on personal or societal values, so data alone cannot settle them. Evidence can show consequences of policies, but it cannot decide which goals—equity, efficiency, liberty—should dominate. Resolving trade-offs requires ethical reasoning and political choices alongside empirical analysis.

➤ Why does the Quantity Theory of Money imply price stability when M and Y stay fixed?
The Quantity Theory uses MV = PY. If M and real output Y do not change and velocity V is stable, then P must remain constant. The theory assumes long-run neutrality of money, so constant monetary and real factors lead to a stable price level, though short-run frictions can cause temporary deviations.

ccording to the loanable funds theory, market interest rates are determined by the factors that control the supply of and demand for loanable funds.
a. True
b. False

In general, workers with high skills and much experience are not affected by the minimum wage because their equilibrium wages are well above the minimum wage. True False
True
False

If the firm hires 5 workers and produces 5 units, the average variable costs equal
a. $100.
b. $800.
c. an indeterminant value. Need more information.
d. $10.

➤ What factors cause the aggregate supply curve to shift?
Aggregate supply shifts when an economy’s productive capacity or costs change. Positive shifts come from faster productivity, more capital, larger labour supply, or better technology. Negative shifts follow higher input costs, adverse supply shocks, stricter regulation, or higher business taxes. Distinguish permanent shifts to long-run capacity from temporary short-run cost movements.

What is the primary objective of the FOMC (Federal Open Market Committee)? Regulating stock markets Maximizing inflation Achieving maximum employment Issuing currency