Refer to the above diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD3, it is experiencing:
A. a negative GDP gap.
B. a recession.
C. a positive GDP gap.
D. cost-push inflation.
Answer: C
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Which of the following is a component part of investment spending?
A) the purchase of a new microwave by a fast food restaurant B) the purchase of 500 shares of corporate stock C) the sale of 500 shares of corporate stock D) all of the above
Suppose you found $5,000 hidden in your closet and deposited it in a demand deposit account at your bank. If the reserve requirement was 10 percent, the deposit would directly create ____ in excess reserves and ultimately lead to a ____ total increase in the money supply, if all banks in the system lend out 100 percent of their excess reserves
a. $500; $5,000 b. $4,500; $5,000 c. $4,500; $45,000 d. $4,500; $50,000
If a firm can maximize its profit by producing the output where price is equal to its marginal cost, the firm is operating in:
A. a perfectly competitive market. B. an oligopolistic market. C. a monopolistic market. D. a monopolistically competitive market.
Suppose Panama produces only two goods, bananas and hats. If Panama has a comparative advantage in bananas, a move toward free trade will:
A. harm hat workers, benefit banana workers, but benefit the nation as a whole. B. harm hat workers, harm banana workers, but benefit the nation as a whole. C. benefit hat workers, harm banana workers, but harm the nation as a whole. D. benefit hat workers, harm banana workers, but benefit the nation as a whole.