In the standard 45° line expenditure model, the C + I line and the C line are parallel because
A. all I is assumed to be autonomous.
B. all I is assumed to be induced.
C. consumption depends on disposable income.
D. I rises with GDP at the same rate as C.
Answer: A
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A) transaction costs. B) indirect financing. C) direct financing. D) moral hazard.
Refer to the production possibilities frontier in the figure above. If the country moves from point a to point c, the opportunity cost of the move is
A) 30 million capital goods. B) 20 million capital goods. C) 10 million capital goods. D) 10 million consumption goods.
Over the past year, productivity grew 1.8%, capital grew 2%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.2 and 0.8, respectively, how much did output grow?
A) 1% B) 2% C) 3% D) 4%
In the absence of externalities, the optimal distribution of resources occurs when production is at
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