Evaluate the following statemets as True or False, then explain your answer: a.

Question

Evaluate the following statemets as True or False, then explain your answer:

a. if relatively more drug users are addicts rather than casual users, prohibition will be more effective. Is this statemetn true or fals? explain.

b. the interest income that could have beenearned on money invested in a college education is not relevant to the decision to attend college. is this statement true or false? explain.

c. increases in aggregate demand will always result in an increase in employment. is this statement true or fals? explain.

d. expansionary fiscal and monetary policies would not be very effective in dealing with the unemployment problems experienced by most European nations. is this statement true or fals? explain.

e. the prospect of Social Security benefits has induced workers to retire at earlier ages. is this true or fals? explain.

Explanation / Answer

(a) False

Prohibition will be effective depending on total number of users affected by prohibition.

(b) False.

The interest income foregone is an opportunity (implicit) cost of getting college education, and the decision to invest in college education needs to be taken after considering all explicit and implicit costs.

(c) False

Increase in aggregate demand may not be fulfilled by sellers, in which case output (and employment) remains unchanged and a market shortage exists, leading to higher prices. Employment will increase only if producers respond to higher demand by increasing output.

(d) False

Expansionary fiscal & monetary policies will together boost aggregate demand in the European countries. Higher demand will encourage higher output, which will increase employment, lower prices and increase GDP.

(e) False

Early retirement is unrelated with social security benefits because, the social security benefit will be lwoer than the wages a worker could earn while being employed. Therefore, by retiring early to live on social security benefits will lower the worker's net income.

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