Average variable costs:
A. decrease when output declines, and increase when output declines.
B. increase when marginal product rises, and decrease when marginal product declines.
C. decrease when marginal product rises, and increase when marginal product declines.
D. increase when output declines, and decrease when output rises.
Answer: C
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The life-cycle hypothesis was developed in the 1950s, primarily by the economist
A) Franco Modigliani. B) Robert Lucas. C) Walter Rostow. D) Nils Hellstrom.
An increase in government spending by $100 would, if the MPC = 0.90, result in an increase in real GDP by:
a. $1,000. b. $9,000. c. $900. d. $190. e. inadequate information is given.
"Men are disposed, as a rule, and on the average, to increase their consumption as their income increases, but not by as much as the increase in their incomes." Which of the following is consistent with this statement by J.M. Keynes?
a. The slope of the consumption function is positive and less than one. b. The slope of the consumption function is greater than that of the 45-degree line. c. The slope of the consumption function is negative. d. The slope of the consumption function is equal to one.
Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?
a. $55 million b. $50 million c. $45 million d. $40 million