In the income-expenditure model, at equilibrium GDP
A. either unemployment or inflation may occur.
B. inflation can occur but unemployment cannot.
C. unemployment can occur but inflation cannot.
D. both unemployment and inflation are impossible.
Answer: A
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When will the scale effect of a wage increase cause a fall in the amount of labor employed?
a. Always. b. When labor is not a regressive factor. c. When labor and capital are substitutes in production. d. When labor and capital are complements in production.
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
In order to predict behavior, economic models must be realistic.
Answer the following statement true (T) or false (F)
________ is an example of a common pool resource
A) Food B) Water C) National defense D) Wi-Fi