If a good is scarce, does that imply that there is a shortage of it?
What will be an ideal response?
No. If a good is scarce, that means that it is limited in supply. All resources in the economy arescarce.
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If short-run equilibrium output equals 20,000 and potential output (Y*) equals 25,000, then this economy has a(n) ________ gap that can be closed by ________.
A. expansionary; increasing government purchases B. expansionary; increasing transfer payments C. recessionary; increasing taxes D. recessionary; increasing government purchases
Use the following diagram to answer the next question.
Based on this diagram, we can say ________.
A. monetary policy is likely to be more effective at fighting a recession than fiscal policy B. investment demand is very sensitive to changes in the interest rate C. an increase in the money supply will have little effect on investment or aggregate demand D. expansionary monetary policy will be more effective at increasing aggregate supply than aggregate demand
If firms pay efficiency wages, they pay wages that
A) are mandated by the government. B) will eventually lower the unemployment rate. C) motivate workers to increase their productivity. D) are lower than average to ensure maximum profit.
The price system
A. is old fashioned and is no longer used. B. is used by the government to maintain stable supply of goods. C. is the voluntary exchange system. D. is used only in countries that are developing.