A. Draw a production possibilities frontier for a country that produces two goods, wine and cheese. Assume that resources are not equally suited to both tasks
b. Define opportunity costs.
c. Use your production possibilities frontier graph to demonstrate the concept of opportunity costs.
What will be an ideal response?
a. The PPF is concave (bowed away from the origin) to reflect the fact that resources are not equally suited to both tasks.
b. Opportunity cost is defined as the highest valued alternative that must be forgone by taking an action.
c. In the PPF graph in part (a), suppose the country is currently producing at point A and wishes to move to point B so that it can produce more wine. The only way it can obtain more wine is to give up some amount of cheese.
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Information and opportunity costs affected patterns of emigration to the U.S
Indicate whether the statement is true or false
According to the Phillips curve, a more expansionary macro-policy that causes inflation to be greater will:
a. place downward pressure on prices. b. reduce unemployment. c. reduce output. d. reduce the natural rate of unemployment.
Frictional unemployment is
a. not inevitable; rather, it can be reduced to zero by well-designed public policies. b. not inevitable; rather, it could be reduced to zero if by the elimination of unemployment insurance. c. inevitable, because at any given time, jobs are being created in some firms and destroyed in other firms. d. inevitable, because in some industries, wages are always set above the level that brings supply and demand into equilibrium.
The idea that expansionary fiscal policy has a positive affect on investment is known as
a. monetary policy. b. crowding out. c. the investment accelerator. d. the multiplier.