Potential output is the
a. maximum rate of output that can ever be achieved.
b. highest rate of output that has ever been achieved in the past.
c. maximum sustainable output level consistent with the economy's resource base and current institutions.
d. the rate of output present when the general level of prices is unstable.
C
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Expansionary fiscal policy will
A) shift the aggregate demand curve to the left. B) shift the aggregate demand curve to the right. C) shift the short-run aggregate supply curve to the left. D) not shift the aggregate demand curve.
The reason protectionism remains strong in the United States is that
A) economists can produce any result they are hired to produce. B) economists cannot persuade the general public that free trade is beneficial. C) economists do not really understand how the real world works. D) the losses associated with protectionism are diffuse, making lobbying by the public impractical. E) economists cannot agree on trade policy recommendations.
A movement of the price index from 108 to 112 represents an improvement in the cost of living
a. True b. False Indicate whether the statement is true or false
If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should
A) split her time evenly between being a lawyer and a word processor. B) specialize in being a word processor because it is more capital-intensive. C) specialize in being a lawyer because its opportunity cost is lower. D) should pursue the activity she enjoys more.