Why is the production possibilities frontier (PPF) typically bowed-outward? Under what circumstances would the PPF be a straight line?
The PPF is typically bowed-outward due to the law of increasing opportunity costs. As more of a product is produced, it becomes increasingly more difficult to find resources that are well-suited to producing that product. Therefore, the opportunity cost of producing more units grows and the PPF becomes steeper and steeper. The PPF is a straight line when the resources used to produce the two products are perfectly interchangeable, and thus the opportunity cost of producing more units is constant.
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Refer to Exhibit 6-2. The employment rate in year 2 is
a. 12 1/2 percent. b. 75 percent. c. 87 1/2 percent. d. 30 percent. e. 50 percent.
Between 1960 and 1995, Social Security benefits:
A. increased, which increased the poverty rate among the elderly. B. decreased, helping reduce the poverty rate among the elderly. C. decreased, which increased the poverty rate among the elderly. D. increased, helping reduce the poverty rate among the elderly.
The shortest of the three lags for monetary policy is
A) the impact lag. B) the implementation lag. C) the government lag. D) the recognition lag.