How much is the output gap if short-run output is $21.0 trillion and potential output is $20.0 trillion?
What will be an ideal response?
+$1.0 trillion
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Suppose that the government of Summerfield spends $2 trillion in 2015 and receives tax revenues of $1.5 trillion. Which of the following is TRUE?
A) Summerfield has a budget surplus of $0.5 trillion. B) Summerfield has a budget deficit of $0.5 trillion. C) Summerfield has a trade deficit of $0.5 trillion. D) Summerfield has a trade surplus of $0.5 trillion.
A price ceiling of $8 placed on the market in the graph shown:
A. is non-binding, and does not affect the market.
B. is binding, and causes a shortage.
C. is binding, and causes a surplus.
D. is non-binding, and does not prevent the market from reaching equilibrium.
As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to
a. overstate the impact of higher prices on consumers. b. consistently underestimate the true inflation rate. c. omit the benefits of product quality improvements. d. have larger fluctuations than other price indexes.
Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is
a. 2.5. b. 0.4. c. 0.5. d. 5. e. inelastic.