The following provides data for an economy in a certain year. Consumption expenditures$1,000Imports$600Government purchases of goods and services$700Construction of new homes and apartments$500Sales of existing homes and apartments$600Exports$500Government payments to retirees$200Household purchases of durable goods$300Beginning-of-year inventory$500End-of-year inventory$600Business fixed investment$300Given the data, compute the government purchases component of GDP.
A. $900
B. $200
C. $500
D. $700
Answer: D
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Natural monopolies occur when there are
A) large diseconomies of scale. B) external economies. C) large economies of scale. D) natural resources involved.
Workers and firms are currently expecting the price level to increase from 110 to 114. The Federal Reserve then announces that it will be reducing the growth rate of the money supply
If the Fed's announcement is credible, and firms and workers have rational expectations, describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.
When a government increases an effective price ceiling for a product
A) the shortage in the market will be reduced. B) the shortage in the market will be increased. C) the surplus in the market will be reduced. D) the surplus in the market will increase.
If the economy in the graph shown were at point B, and the government wished to bring the economy back to its long-run equilibrium, it might:
A. increase government spending.
B. increase income tax.
C. decrease tax credits.
D. All of these would move the economy to its potential GDP from point B.