If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, potential output (Y*) equals 11,000, then government purchases must ________ to eliminate any output gap.
A. increase by 5,000
B. decrease by 200
C. increase by 1,000
D. increase by 200
Answer: D
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Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, how many hats will be produced?
A) 0 B) 1 C) 2 D) 4
An unexpected rise in Housing Starts should send bond prices __________ and stock prices __________
A) up; up B) up; down C) down; up D) down; down
Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?
A. A reduction in business taxes. B. Production bottlenecks occurring when producers near full plant capacity. C. An increase in the price of imported resources. D. Deregulation of industry.
The consumer price index (CPI) _____ inflation because it includes an item in the market basket only after the product becomes _____
a. overstates; unpopular b. overstates; obsolete c. overstates; widely used d. understates; widely used e. understates; obsolete