Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?
a. GDP necessarily increases.
b. GDP necessarily decreases.
c. GDP is unaffected because neither the rent nor the estimate of the value owner-occupied housing services is included in GDP.
d. GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services.
d
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Relate the declaration of war by the United States against terrorism to the production possibilities curve.
What will be an ideal response?
____ occur when an X percent increase in input use raises output by more than X percent, so that the more the firm produces, the lower its per-unit costs become
a. Economies of scope b. Scale economies c. Product differentiation d. Perfect competition
Which of the following is an example of adaptive expectations?
a. James hears that many companies are laying off people and decides not to change his job at this time b. Kirsten reads about the continuous rise in the prices of necessary goods and the simultaneous rise in the level of unemployment and knows that the country is heading for stagflation. c. Kate knows that inflation is on the rise and that the best strategy for her firm would be to lower the price of its product. d. Peter knows that the Federal Reserve is planning to lower interest rates next month and decides to apply for a loan.
If unemployment is a problem, the Fed could ______ bonds and ______ the reserve requirement.
A. buy; increase B. buy; decrease C. sell; increase D. sell; decrease