When the inflationary gap is finally eliminated, a long-run equilibrium is established with a ____ price level and with GDP ____ potential GDP.
A. higher; equal to
B. higher; greater than
C. lower; equal to
D. lower; greater than
Answer: A
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Sporto Auto Company manufacturers each of the aluminum engines used in their cars, and there is no outside market for these engines. Suppose the marginal cost of producing the aluminum engines is constant at all quantities
What happens to the optimal transfer price and the quantity of cars produced if the cost of assembly increases? A) Price and quantity increase B) Price and quantity remain the same C) Price and quantity decrease D) Price remains the same and quantity decreases
A major difference between social insurance and income assistance programs is that
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Pollution is an example of a ________ externality
A) negative production B) positive production C) negative consumption D) positive consumption E) Coasian