In the above table, there are no taxes and no imports or exports. The equilibrium level of expenditure for this economy is
A) any level because investment always equals government expenditures.
B) no level because consumption expenditure is always less than real GDP.
C) $3,000.
D) $5,000.
Answer: D) $5,000.
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When the real interest rate falls, the consumption function
A) does not shift and there is a movement downward along the consumption function. B) shifts upward. C) does not shift and there is a movement upward along the consumption function. D) shifts downward. E) does not shift and there is no movement along the consumption function.
In the long run, the real interest rate is 3 percent, real GDP grows at 4 percent, velocity is constant, and the quantity of money grows at 6 percent. The nominal interest rate is
A) 3 percent. B) 10 percent. C) 5 percent. D) 6 percent. E) 4 percent.
Government transfer payments like social security and unemployment benefits are
A) included in government purchases. B) not included in government purchases. C) not included in government purchases, but they are included in the consumption component of GNP. D) not included in government purchases, but they are part of the investment component of GNP. E) included in government purchases but not in the GNP.
The production possibilities frontier represents all desirable combinations of two goods
a. True b. False