What movement would show a change in induced expenditure?
What will be an ideal response?
Answer: Shifting right of left on the X-axis (Real GDP, Y)
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When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage
A) decrease in real GDP. B) decrease in velocity. C) decrease in the price level. D) increase in the price level. E) increase in real GDP.
In discussions of barriers to entry, what is meant by the term "virtuous cycle"?
A) A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. B) A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the "invisible hand"). C) A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers. D) A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market.
If the government wants to regulate a natural monopoly while ensuring the firm does not earn profits or require subsidies, the government will force the firm to set price equal to
A) average cost. B) marginal cost. C) marginal revenue. D) None of the above.
If a company is the sole U.S. producer of good X, the market may still be contestable because of all but which one of the following?
A. New technology may threaten to make good X obsolete. B. Many domestic firms can potentially begin production of good X. C. The presence of a government franchise. D. Foreign producers can provide good X to the U.S. market.