Relate the declaration of war by the United States against terrorism to the production possibilities curve.
What will be an ideal response?
ANS:
As the need or desire for military goods and services increases, the nation will need to devote more resources to military use. This can be represented by a movement along a production possibilities curve with military goods on one axis and consumer goods or investment on the other axis.
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Which of the following is the best example of a variable cost?
a. property taxes b. lease payments for equipment rental c. rent on office space d. wages for hourly workers e. interest on outstanding loans
After new HUD guidelines were issued in 1999, Freddie Mac and Fannie Mae
a. extended fewer loans to borrowers making a down payment of 5 percent or less. b. extended more loans to borrowers making a down payment of 5 percent or less. c. extended new loans only to borrowers making a down payment of at least 20 percent. d. refused to extend new loans without full verification that the borrower had prime credit status.
When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the:
A. tax, then, generates a $100 million decline in real GDP. B. level of real GDP expands by $100 million. C. effect on real GDP is uncertain. D. tax multiplier overpowers the income multiplier, triggering a rollback in real GDP.
Investment spending includes spending on:
A. capital goods, residential housing, and changes in inventories. B. stocks, bonds, and other financial instruments. C. durables, nondurables, and services. D. goods and services by federal, state, and local governments.