Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output
B. D; an expansionary
C. B; recessionary
D. D; a recessionary
Answer: D
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The reported reduction in the exchange-rate pass through to import prices means that U.S. inflation will be relatively insensitive to exchange rate changes
Indicate whether the statement is true or false
If a perfectly competitive firm is producing 500 units and, at the 500th unit, the difference between marginal revenue and marginal cost (MR - MC) is negative, which of the following is true?
A) The 500th unit costs less to produce than the firm earns in revenue. B) The firm should decrease production to maximize profit. C) The firm is maximizing profit. D) The firm should increase production to maximize profit.
The following graph shows the production possibilities curve for the economy with only two members, Silvia and Art. Silvia can produce either 50 pounds of beef or 2 computers per week, and Art can produce 100 pounds of beef or 1 computer per week. Both of them work 40 weeks per year.
With the opportunity to trade, Silvia can trade all the computers she can produce per year if she specializes in producing computers, for ________ pounds of beef.
A. 3,000 B. 4,000 C. 2,000 D. 6,000
Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:
A. 2 percent. B. 3 percent. C. 5 percent. D. 7 percent.