To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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Use the following information to answer the question below. Cloe is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents each and hard candies cost 80 cents each. The marginal utilities derived from the consumption of each product are as shown in the following table.Number of Items Marginal Utility of Chocolates Marginal Utility of Hard Candies 1 60 150 2 50 140 3 40 120 4 30 100 5 20 80 6 10 70 7 5 50 8 0 20 Which combination would maximize Cloe's total utility given her $4 budget?
A. 0 chocolates and 5 hard candies B. 2 chocolates and 4 hard candies C. 4 chocolates and 3 hard candies D. 6 chocolates and 2 hard candies
Assume the market is in equilibrium in the graph shown at demand D and supply S2 (at a quantity of 6). If the supply curve shifts to S1, and a new equilibrium is reached (at a quantity of 4), which of the following is true?
A. Total surplus would increase by $7.50.
B. Total surplus would decrease by $16.50.
C. Total surplus would increase by $32.
D. Total surplus would decrease by $14.00.
"It is difficult to compare over time health care expenditures, costs, and output." Do you agree or disagree? Why?
What will be an ideal response?
Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. lower; higher D. higher; potential