If production involves decreasing opportunity cost, the production possibilities frontier
A. is “bowed inward.”
B. is a straight line.
C. is “bowed outward.”
D. is a wavy line.
E. has an unpredictable shape.
Answer: A
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Autonomous planned spending is a function of the
A) marginal propensity to consume. B) marginal propensity to save. C) interest rate. D) tax rate.
The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply
A) does not increase. B) increases by $800,000. C) increases by $1 million. D) increases by more than $1 million.
Which of the following statements concerning income and substitution effects is not true?
a. Income and substitution effects cause the demand curve to slope downward. b. When the price of a good falls, real purchasing power increases and consumers can purchase more of all goods. c. The substitution effect describes the situation in which more of the good whose price has fallen is purchased, and less of all other goods is purchased. d. A price decrease of one good cannot cause the income effect. e. Income and substitution effects are related to diminishing marginal utility and consumer equilibrium.
A key characteristic of a competitive market is that
a. government antitrust laws regulate competition. b. producers sell nearly identical products. c. firms minimize total costs. d. firms have price setting power.