Suppose equilibrium for an economy occurs when C + I + G + X = $20 trillion. If the real Gross Domestic Product (GDP) is $21 trillion, then unplanned inventories are
A. decreasing, and real Gross Domestic Product (GDP) will contract.
B. increasing, and real Gross Domestic Product (GDP) will expand.
C. decreasing, and real Gross Domestic Product (GDP) will expand.
D. increasing, and real Gross Domestic Product (GDP) will contract.
Answer: D
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What are transactions costs? Why do transactions costs create difficulties in finding a private solution to the problem of pollution?
What will be an ideal response?
The market mechanism provides a financial incentive for firms to minimize the pollution they create
a. True b. False Indicate whether the statement is true or false
MegaCable and Acme are competing for an exclusive contract to provide the city of Dustin with cable television for the next year. The firm that wins the contract will earn an economic profit of $5 million. The contact will be awarded to the firm that spends the most on lobbying. If both firms spend the same amount on lobbying, then the winner will be determined by a coin flip, so each will have a 50 percent chance of winning. Suppose MegaCable spends $2,000,002 on lobbying, and Acme spends $2,000,001 on lobbying. In this case, MegaCable's economic profit net of its lobbying costs will be ________, and Acme's economic profit net of its lobbying costs will be ________.
A. $499,998; -$2,000,001 B. $2.5 million; $2.5 million C. $5 million; 0 D. $2,999,998; -$2,000,001
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease