Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential
B. recessionary; higher; potential
C. recessionary; lower; lower
D. expansionary; higher; higher
Answer: A
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Which of the following correctly explains the role of the government in a free market?
A) The government acts as a referee by enforcing contracts and preventing stealing. B) The government sets prices according to the relative value of each good. C) The government allocates goods to those buyers who value the goods the most. D) The government sets production quotas for sellers in the market.
If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour, using the midpoint formula the elasticity of supply equals
A) 0.33. B) 2.94. C) 3.08. D) 0.23. E) -3.08.
The production contract curve:
A. shows every efficient allocation of inputs between two firms in an Edgeworth box. B. shows every efficient allocation of consumption goods in an Edgeworth box. C. passes through the intersections between all pairs of isoquants in an Edgeworth box. D. passes through the intersections between all pairs of indifference curves in an Edgeworth box.
The adoption of modern technologies and business methods have the possibility to improve economic performance in a nation with low per capita income and low growth, but only if
a. its natural resources are sufficient. b. its workers become educated rapidly enough. c. it improves its institutions, making them sound enough to attract capital and entrepreneurial activity. d. its government has enough skilled planners to properly deploy new capital.