The long-run aggregate supply curve shows the output level that an economy can produce when:
A. firms adjust quantity rather than price.
B. both capital and labor are fully employed.
C. capital is fully employed.
D. labor is fully employed.
Answer: B
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In monopolistic competition, when firms make an economic profit
A) the existing firms continue to make an economic profit in the long run because of product differentiation. B) new firms enter the industry so that the price falls and the economic profit eventually falls to zero. C) new firms enter the industry so that output decreases and the economic profit increases. D) new firms enter the industry so that output increases and the economic profit increases.
Which of the following is NOT a government response to asymmetric information?
A) liability laws B) social regulation C) manufacturer's warranties D) government licensing
Economic expansions in Germany and Japan would cause
A. the U.S. price level and real GDP to rise. B. the U.S. price level and real GDP to fall. C. the U.S. price level to rise and real GDP to fall. D. the U.S. price level to fall and real GDP to rise.
If a country pegs its currency to a foreign currency, it no longer has the ability to use monetary policy to stabilize the economy because:
A. it no longer has a central bank. B. banks will begin to hold 100 percent of their deposits in reserves. C. monetary policy must be used to keep the exchange rate's market equilibrium value at its official value. D. it must eliminate its currency from circulation and replace it with the foreign currency.