Which of the following would best explain a decline in potential GDP?
A) Negative net investment
B) The discovery of vast new oil reserves
C) a lower price level
D) a decrease in the infant mortality rate
E) decrease in wages and profits
Answer: A) Negative net investment
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The simple deposit multiplier can be expressed as the ratio of the
A) change in reserves in the banking system divided by the change in deposits. B) change in deposits divided by the change in reserves in the banking system. C) required reserve ratio divided by the change in reserves in the banking system. D) change in deposits divided by the required reserve ratio.
Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink), and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant and food is relatively land-intensive. If the countries engage in free trade, Alpha will
A. import both goods. B. export food and import drink. C. export drink and import food. D. export both food and drink.
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the centrist Democrat suggests an increase to infrastructure spending. Suppose the centrist Republican suggests an increase in cyber-defense spending. The Democrat says that the extra infrastructure spending will decrease travel times and be the most valuable. The Republican is arguing that, on average, cyber-security is worth the money, so more is better. What is going on here?
A. Neither are using marginal analysis. B. Only the Democrat is using marginal analysis. C. Only the Republican is using marginal analysis. D. Both are employing marginal analysis, just from different perspectives.
As long as the multiplier process is working, firms will meet additional demand without raising prices.
Answer the following statement true (T) or false (F)