How are potential GDP, full employment and the LAS curve related?
What will be an ideal response?
When the economy is at full employment there is no cyclical unemployment and the economy is at its potential level of real GDP. The LAS curve is vertical at the level of potential real GDP.
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If the real interest rate is lower than the equilibrium real interest rate:
A) the quantity of credit demanded equals the quantity of credit supplied. B) the quantity of credit demanded falls short of the quantity of credit supplied. C) the quantity of credit supplied falls short of the quantity of credit demanded. D) interest rates tend to fall further.
Which if the following is a key difference between profit-oriented institutions (such as small businesses) and non-profit institutions (such as governments, hospitals, or schools)? Profit-oriented institutions
A) are usually competitive rather than cooperative. B) have a recognized residual claimant. C) pursue private interests rather than the public interest. D) rely on monetary incentives to secure the cooperation required for their functioning. E) work through market processes.
Refer to Figure 27-1. Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from
A) A to E. B) C to B. C) B to C. D) B to A. E) A to B.
Which of the following is NOT a barrier to entry that would allow a monopolist to keep potential competitors out of its market?
A) Significant economies of scale exist. B) The market price of the product is too high. C) The firm has a patent on the good or control over some resource required for the production of the good. D) The firm has government authorization to be a monopoly.