The elasticities approach and the absorption approach are theories of the balance of trade that emphasize trade in real goods and have little to say about the capital account
Indicate whether the statement is true or false
TRUE
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
Classical economists predicted that population growth would eventually reduce economic growth because they believed:
A. in the law of diminishing marginal productivity. B. in the law of increasing marginal productivity. C. that production involved increasing returns to scale. D. that production involved decreasing returns to scale.
Domestic policies can have unintended effects on international trade
Indicate whether the statement is true or false
All of the following are automatic stabilizers EXCEPT
A. unemployment compensation. B. income transfer payments. C. discretionary increases in government spending. D. progressive income tax system.