If AS increases at a faster rate than AD, the result will be
A. demand-side inflation.
B. supply-side inflation.
C. falling prices.
D. stable prices.
Answer: C
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Other things being constant, if the marginal propensity to save (MPS) is 0.1, and private investment spending falls by $100 million, then real Gross Domestic Product (GDP)
A) increases by $1 billion. B) increases by $90 million. C) decreases by $1 billion. D) decreases by $10 million.
The long run is defined as
A) any time after six months. B) any time after one year. C) the period of time when all resources are fixed. D) the period of time when most (more than 50 percent) resources are variable. E) the period of time when all resources are variable.
Recessions are typically
A) unintended and disruptive. B) easy to predict in advance. C) the result of non-monetary disturbances. D) events economists have a hard time explaining.
What is the short-run break-even price? What are economic profits at this price? Why would a firm be willing to operate permanently at this price?
What will be an ideal response?