Question

1) Explain the difference between consumption possibilities and production possibilities. How it is possible for a country to consume a greater quantity of goods and services than it is actually capable of producing?

2) If more teenagers stay in school longer rather than dropping out and entering the labor force,
A. The unemployment rate goes up.
B. The production possibilities curve remains unchanged.
C. The production possibilities curve shifts outward.
D. The production possibilities curve shifts inward.

3) Describe the two protective mechanisms used to protect the economy against inflation. Who is hurt and who is helps by each of the protective mechanisms? Why?

4) Describe the 3 factors that impact the shape of the aggregate demand curve.

5) Describe Rostow's 5 Stages of Development. What stage is the US in today?

6) Which of the following possible in-kind transfers do you think raises the "true" incomes of recipients the most: a) free golf lessons; b) free public transportation on public buses; or c) free food? Why?

7) How do government programs that provide benefits for the poor (such as food stamps and subsidized housing) change the incentives of people to be classified as "poor"? Explain.