A rise in government spending will cause a(n):
a. Increase in aggregate demand
b. Decrease in prices
c. fall in aggregate demand
d. decrease in real domestic output
Answer: a. Increase in aggregate demand
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Which of the following fiscal programs is least likely to affect aggregate demand?
a. Defense spending b. Road construction c. Grants for scientific research and development d. Social Security for women e. Government purchases of labor
If Sam, a farmer in 1963, finds that he needs two bushels of corn to buy what his grandfather bought with one bushel during the 1910–1914 benchmark period, then
a. Sam is twice as well off in 1963 than his grandfather was b. farm productivity has declined by half over this period c. the equilibrium price of corn has obviously doubled d. a price floor that doubles the 1963 market price creates full parity in 1963 e. Sam will have to leave the farm
At the level of output where marginal revenue equals marginal cost, assume that the price of a competitive firm's product is between the firm's average total cost curve and its average variable cost curve. In this case the firm would
A. decrease output to reduce the costs. B. continue to operate in the short run. C. shut down. D. increase output to increase profit.
Adam Smith's pin factory illustrated the
A. advantages of economies of scale. B. disadvantages of economies of scale. C. importance of receiving quantity discounts. D. dangers of corporate bureaucracies.