Exhibit 2-4 Production possibilities curve data
A
B
C
D
E
Capital goods 0
10
20
30
40
Consumer goods200
180
140
80
0
In Exhibit 2-4, choose the best production alternative if the only goal of the economy is investment.
A. A
B. C
C. E
D. All production alternatives represent the same level of investment because all are efficient.
Answer: C
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If the economy is experiencing an inflationary gap and the government wants to accelerate the adjustment to the long-run equilibrium, it should
A) reduce aggregate demand by cutting government spending or raising taxes. B) reduce aggregate demand by increasing government spending or cutting taxes. C) increase aggregate supply by cutting government spending or raising taxes. D) increase aggregate supply by increasing government spending or lowering taxes.
Which of the following statements is correct?
a. In order to calculate the inflation rate for the year 2011, we need to know the values of the consumer price index for the years 2009, 2010, and 2011. b. Changes in the consumer price index are often thought to be useful in predicting changes in the producer price index. c. Despite its name, the "consumer price index" really measures the overall cost of the goods and services bought by consumers, business firms, and units of government. d. If the prices of all goods and services changed proportionately over time, then the consumer price index would reflect no substitution bias.
What is meant by the political business cycle?
Economies of scale exist when
A. fixed cost decreases as output increases. B. long-run marginal cost is less than long-run average cost. C. long-run average cost decreases as output increases. D. both a and b E. both b and c