In the product market, who is making the payments?
a. households
b. firms
c. governments
d. producers
a. households
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The theory that government borrowing may function like an increase in taxes, that is, reducing current consumption and business expenditures, was formulated by
A) John Maynard Keynes B) Jean Baptiste Say. C) David Ricardo. D) Adam Smith.
If a negative externality exists in the production of paper and paper is sold in a perfectly competitive market, at the equilibrium output:
A. additional net gains to society are not possible from either increasing or decreasing the output of paper. B. the marginal social benefit of paper equals its marginal social cost. C. additional net gains to society are possible by increasing the output of paper. D. additional net gains to society are possible by reducing the output of paper.
There are some special types of goods for which supply cannot change, irrespective of the length of time allowed for change, such as Beethoven symphonies. The price elasticity of supply for these goods is _____
a. infinite b. nonexistent c. negative d. zero e. unity
Answer the following statement(s) true (T) or false (F)
1. The formula for calculating aggregate demand is the same formula used to calculate GDP using the expenditure approach. 2. The aggregate demand and aggregate supply model is a closed economy model because it includes international trade effects. 3. An inverse relationship exists between the quantity of real GDP demanded and the overall price level. 4. The aggregate demand curve is downward sloping. 5. Purchasers in the economy demand more real output when the price level rises.