In the classical model, a change in aggregate demand
A. causes changes in both the long-run real GDP and in the price level.
B. causes a change in long-run real GDP but not in the price level.
C. has no effect on either real GDP or the price level.
D. causes a change in the price level but not in the long-run real GDP.
Answer: D
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For a given level of output, the short-run total cost of production
a. always falls below the long-run total cost of production b. always exceeds the long-run total cost of production c. always equals the long-run total cost of production d. may exceed or equal the long-run total cost of production e. may exceed or fall below the long-run total cost of production
Saving is a leakage in the sense that
a. saving is lost to the economy and ultimately leads to stagnation. b. the financial system often makes negative profits. c. it often accompanies a trade deficit. d. consumers spend less than their total income.
The Jones family has always been in the business of manufacturing and selling automobile tires. Usually the profit they earn is reinvested in the business. This year Seth, the youngest son, wants to invest the profit into starting a candy company. If Seth is a shrewd businessman, what does his suggestion indicate?
The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called
a. credit risk. b. interest risk. c. term risk. d. private risk.