If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that:
A. The substitution effect is greater than the output effect
B. The output effect is greater than the substitution effect
C. The income effect is greater than the output effect
D. Labor cannot be easily substituted for capital
A. The substitution effect is greater than the output effect
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When someone asks how much money you made this year, they are using the term “money” correctly.
Answer the following statement true (T) or false (F)
If a firm is producing at the kink in its demand curve and it decides to increase its price, according to the kinked demand model
A. It will not gain market share but will definitely increase profits. B. It will lose market share to the firms that do not follow the price increase. C. It will gain market share. D. Its market share will not be affected.
The idea that a $1 increase in infrastructure spending will generate more than $1 in economic growth is a representation of:
A. the multiplier effect. B. an outside lag. C. an inside lag. D. an automatic stabilizer.
Productivity measures (such as output per worker-hour) and wage rates adjusted for inflation in the United States are:
A. Inversely related B. Unrelated C. Directly, but not closely, related D. Directly and closely related