If the economy is underutilizing its economic resources, the Fed should
A. expand the money supply to increase aggregate demand.
B. contract the money supply to decrease aggregate demand.
C. discourage investment spending.
D. decrease aggregate supply.
Answer: A
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People can reduce the inflation tax by
a. reducing savings. b. increasing deductions on their income tax. c. reducing cash holdings. d. None of the above is correct.
Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?
A. As more of the variable factor is used, the higher the price of that factor. B. When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. C. As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. D. As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs.
A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $4.50. What do you recommend this firm do?
A) Increase production above the current output rate, because MC = MR at this rate of output. B) Continue to produce the current output rate, because P > AVC. C) Shut down, because AVC > P. D) Shut down, because ATC > P.
Which of the following is issued to an investor to provide protection from having the invention copied or stolen for 20 years?
A. a license B. a certificate of convenience C. a patent D. a natural monopoly