In the classical model, the level of real GDP per year does not depend on the level of aggregate demand.
Indicate whether the statement is true or false.
Answer: True.
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Assume the market is in equilibrium in the graph shown at demand D and supply S1. If the supply curve shifts to S2, and a new equilibrium is reached, equilibrium quantity will increase from 4 to 4.5 units. Which of the following is true?
A. Producer surplus increases by $3.00.
B. Producer surplus decreases by $8.50.
C. Producer surplus increases by $7.50.
D. Producer surplus decreases by $16.
If a firm produces zero units of output,
a. total revenue equals zero b. total cost equals zero c. total cost will equal explicit costs d. profit will equal zero e. the firm will earn only a normal profit
Demand for gasoline is inelastic because there are no substitutes available.
a. true b. false
A rancher raises alpaca. Once a year, he shears them and sells the raw wool to a processor who spins it into yarn. The yarn is then sold to a mill which produces and sells alpaca sweaters. In calculating GDP we would count
A. only the yarn and the sweaters. B. only the sweaters. C. the raw wool, the yarn and the sweaters. D. only the raw wool and the yarn.