A recessionary gap occurs in the economy when
A) Aggregate demand is in the depression or Keynesian range of the aggregate supply curve.
B) Aggregate demand is less than potential GDP.
C) Aggregate demand is less than full employment output.
D) None of the above.
Answer: C
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Average cost regulation of a natural monopoly does not involve: a. production at a socially inefficient level of output
b. a tendency for average total cost curves to shift upward over time. c. a subsidy. d. production at the output level at which demand intersects the average total cost curve.
Suppose Sam's Shoe Co. makes one kind of shoe. An example of a fixed cost for this company would be:
A. the needles for the sewing machines that need to be replaced after sewing every 1,000 pairs. B. the leather needed to make the shoes. C. the lease for the factory building. D. All of these are examples of fixed costs.
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
What is a multilateral trade pact? Discuss the first one that was formed and what its impact has been.
What will be an ideal response?