1. Explain how an increased federal budget deficit resulting from a recession can actually help stabilize an economy.

2. Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium.

3. Explain why a system of marketable pollution permits leads to less costly pollution abatement and a higher concentration of polluted areas than a command-and-control system.

4. Although GDP per capita is the most commonly used measure of a country's success, many economists believe it does not give an accurate measure of a nation's economic well-being. Some studies have concluded that that GDP is not the best measure of well-being, and although it may be the best available on a timely basis, other factors need to be considered in addition to GDP to give a more accurate picture of economic well-being and the disparity of well-being between nations. Clearly identify at least three such factors that in your view should be included in the GDP calculations. Explain and illustrate how they will help to improve the GDP as a tool for measuring the well-being of a nation.