Tom says the economy should focus more on producing fun things people can buy if it is going to grow. Sam says if the economy is going to grow, it should consume less now and invest in education, factories, and research. Who is right and why?
What will be an ideal response?
Sam is right, because investing in capital goods, such as computers and other new technological equipment, as well as upgrading skills and knowledge, expands the ability to produce in the future. It shifts the economy’s production possibilities curve outward, increasing the future production capacity of the economy. That is, the economy that invests more now (and consumes less now) will be able to produce, and therefore consume, more in the future.
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Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that
A) real GDP in Dingo was increasing in January 2011. B) an expansion occurred after January 2011. C) Dingo did not experience a recession in 2010. D) Dingo's potential GDP fell in 2011.
Identify the correct statement
a. Demand is the total quantity of a product that people are willing, even if unable, to purchase at a given price. b. Demand for a product is the same as the quantity demanded of a product. c. Demand represents the different quantities of a good or service that provides consumers the same amount of utility. d. Demand is the quantity of a product that people are willing and able to purchase at different prices. e. Demand is the quantity of a product that producers are willing to produce at a particular price.
If policy makers do nothing in a recessionary gap, the most likely outcome is a
a. drop in the inflation rate and a rise in the unemployment rate. b. drop in the inflation rate and a drop in the unemployment rate. c. rise in the inflation rate and a drop in the unemployment rate. d. rise in the inflation rate and a rise in the unemployment rate.
In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?
a. the interest rate b. net exports c. the exchange rate d. All of the above are correct.