Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the long run?
A. a recessionary gap
B. an inflationary gap
C. a reduction in real GDP
D. none of these
Answer: D
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Use the following diagrams for the U.S. economy to answer the next question.
Which of the diagrams best portrays the effects of an increase in foreign spending on U.S. products and an expansion?
A. Graph (1) B. Graph (2) C. Graph (3) D. Graph (4)
A reason why there is more competition among restaurants than among large discount department stores is that restaurants
A) have more elastic demand for their product compared to department stores. B) unlike department stores, do not have significant economies of scale. C) unlike department stores, have to abide by government sanitation rules. D) have to cater to a variety of consumer tastes while department stores do not.
Suppose residents of Toadhop live on the Quabache River, a river prone to flooding. Suppose there are 1000 (type A) people who value flood control more than the 1000 (type B) people. Type A Demand QD = 100 ? P Type B Demand QD = 50 ? P Where Q measures the quality of flood control. If the price of a unit of flood control is $100,000 and the citizens of Toadhop gather for a townhall meeting to
find the socially optimal level of flood control, and they are successful, they will pick Q equal to a. 0 b. 10 c. 25 d. 70
The base period is the time period used for comparative analysis.
Indicate whether the statement is true or false.