Principles_of_Macro-Homework_1 - Principles of...

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Principles of Macroeconomics Homework 1 1. One tradeoff society faces is between efficiency and equality. Explain. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy. 2. Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today? 3. Under what conditions might government intervention in a market economy improve the economy’s performance? 4. Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run. 5. Using the outline below, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram. 6 6. Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
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This note was uploaded on 03/18/2012 for the course ITEC 3290 taught by Professor Dunn during the Spring '12 term at East Carolina University .

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Principles_of_Macro-Homework_1 - Principles of...

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