The above figure shows the AE curve and 45° line for an economy
a. If real GDP equals $10 trillion, how do firms' inventories compare to their planned inventories?
b. If real GDP equals $20 trillion, how do firms' inventories compare to their planned inventories?
c. What is the equilibrium level of expenditure? Why is this amount the equilibrium?
a. If real GDP equals $10 trillion, aggregate expenditure exceeds GDP and so firms' inventories are less than planned.
b. If real GDP equals $20 trillion, aggregate expenditure is less than GDP and so firms' inventories are more than planned.
c. The equilibrium level of expenditure is $15 trillion because at this level of GDP, aggregate expenditure equals GDP. As a result, firms' inventories equal planned inventories so firms have no incentive to either increase or decrease production.
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Refer to Figure 2-10. In the circular flow diagram, market K represents
A) product markets. B) firms. C) households. D) factor markets.
In 2014, which component of GDP had a negative value?
A) investment B) government spending C) net exports D) consumption
A key point in the difference between the United States and the European Union as OCAs, is that:
A) the intra-European Union trade is significantly higher than the intrastate trade in the United States. B) the intra-European Union trade is significantly lower than the intrastate trade in the United States. C) the intra-European Union labor migration is much higher than the intrastate migration in the United States. D) in the United States, language creates a significant barrier.
Flour is an input used to produce cookies. Suppose that the price of flour rises. As a result
A) the supply curve for flour will shift to the right. B) the supply curve for flour will shift to the left. C) the supply curve for cookies will shift to the right. D) the supply curve for cookies will shift to the left.