The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier.
B. self-correcting property.
C. short-run equilibrium property.
D. long-run equilibrium property.
Answer: B
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High opportunity costs go hand in hand with high money costs in a properly functioning economy.
Answer the following statement true (T) or false (F)
Ian views playing Wartcraft and drinking soda as perfect complements (one soda with one hour of playing Wartcraft). Currently, sodas are $1 each and Wartcraft costs $1 per hour. Ian has $12 of income
a. Compute Ian's Compensating Variation if the price of Wartcraft rises to $2. b. Compute Ian's Equivalent Variation if the price of Wartcraft rises to $2. c. Compute Ian's change in Consumer Surplus if the price of Wartcraft rises to $2.
In a closed economy, an increase in government spending, while taxes remain the same, will be accompanied by
A) a decrease in private investment and an increase in privates saving. B) an increase in private investment and a decrease in private savings. C) a decrease in private investment only. D) an increase in private savings only.
Which of the following best illustrates diversification?
a. A company that produces many different products decides to produce fewer. b. After selling stock, corporate management spends funds on projects with greater risks than shareholders had anticipated. c. Instead of holding only the stocks of companies engaged in the banking business, a person decides to hold stock in a number of different companies producing different goods and services. d. A person decides to purchase only stocks that have paid high dividends in the past.