If the demand for a good is perfectly elastic, then the demand curve is horizontal
Indicate whether the statement is true or false
TRUE
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Consider an investment with the following payoffs and probabilities: State of the Economy Probability Return GDP grows slowly .70 1,000 GDP grow fast .30 2,000 Let the expected value in this example be 1,300 . How do we find the standard deviation of the investment?
a. ? = ? { (1000-1300)2 + (2000-1300)2 } b. ? = ? { (1000-1300) + (2000-1300) } c. ? = ? { (.5)(1000-1300)2 + (.5)(2000-1300)2 } d. ? = ? { (.7)(1000-1300) + (.3)(2000-1300) } e. ? = ? { (.7)(1000-1300)2 + (.3)(2000-1300)2 }
Which of the following statements about incentives is true?
a. Changing one incentive can result in several unseen effects. b. Understanding how people respond to incentives helps government planners organize the economy. c. Fair-minded people who care about others will not be affected by incentives. d. Emphasizing incentives ignores altruistic nonmonetary values.
What will you conclude about a regression model if the Breusch-Pagan test results in a small p-value?
A. The model contains homoskedasticty. B. The model contains heteroskedasticty. C. The model contains dummy variables. D. The model omits some important explanatory factors.