What is potential GDP?
A) It is the level of real GDP in the long run.
B) It is the difference between current GDP and maximum GDP.
C) It is the level of real GDP in the short run.
D) It is the level of GDP at which inflation is constant.
Answer: A
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Assume there is a reduction in the shipments of petroleum products due to political tension in the Persian Gulf. In a market economy, which consumers would get the reduced supplies of gas?
A) The consumers who value gasoline the most and are able to pay for it. B) Wealthy consumers. C) Lower income consumers. D) Who gets the gasoline would be a random process. Those who arrive at the service station first will get the gasoline, regardless what its price is.
A bank creates money when it:
a. gets new checkable deposits which the depositor formerly held as cash. b. has a loan paid off, which creates excess reserves for the bank. c. makes a loan from its excess reserves. d. holds back excess reserves because of an increase in the required reserve ratio. e. gets more excess reserves because of a decrease in the required reserve ratio.
If there is an increase in market demand in a perfectly competitive market, then in the short run
a. there will be no change in the demand curves faced by individual firms in the market b. the demand curves for firms will shift downward c. the demand curves for firms will become more elastic d. market supply will fall e. profits will rise
When a government subsidy is granted to the buyers of a product, sellers can end up capturing some of the benefit because
a. the market price of the product will fall in response to the subsidy. b. the market price of the product will rise in response to the subsidy. c. the market price of the product will not change in response to the subsidy. d. producers will reduce the supply of the product.