If actual real GDP is greater than the equilibrium level of real GDP (i.e., the aggregate expenditures function is below the 45-degree line), what happens to restore equilibrium to the economy?
What will be an ideal response?
At the current level of real GDP, aggregate spending (C + I + G + NX) is less than aggregate supply. The amount of goods and services produced is greater than the amount people intend to buy. Inventories rise above the levels firms desire to hold. These unintended inventory increases are a signal to firms to reduce production. Production will continue to fall until the amount firms produce just equals aggregate expenditures.
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Explain why labor might not always be a variable input
What will be an ideal response?
Consider a country Atlantica, using dollars ($) as its currency. If this country sets a price for gold, and then issues currency such that the amount in circulation is equivalent to the value of gold held in reserve, it is said to be the following:
a. an exchange standard. b. a gold standard. c. a reserve currency standard. d. a crawling peg standard. e. a currency board standard.
An example of a good or service that would not count in the U.S. GDP would be:
A. a car made by Ford in Michigan. B. a car made by Toyota in Tennessee. C. sneakers made by Nike in Indonesia. D. sneakers made by New Balance in Ohio.
The four largest firms account for approximately 90% of U.S. beer sales. The U.S. beer industry would be best classified as a(n)
A. perfectly competitive industry. B. monopolistically competitive industry. C. monopoly. D. oligopoly.