Evaluate the statement that “for a private open economy the equilibrium GDP always corresponds with an equality of exports and imports.”
What will be an ideal response?
This statement would be true only by coincidence, if ever. Equilibrium GDP (in the absence of government) exists when aggregate demand equals aggregate supply (GDP). Aggregate private demand consists of three components: C, Ig, and net exports. There is no reason why net exports must equal zero. The only requirement is that the sum of the three components, C, Ig, and (X ? M) sum to the same value as aggregate supply. At that point GDP will be in equilibrium. C or Ig or X or M or any or all of these can adjust in a situation where disequilibrium exists, but equilibrium doesn’t necessitate net exports of zero.
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The "minimum efficient scale" of operation in an industry is defined as:
A) the smallest plant size that can be operated by firms in the industry. B) the scale of operation at which economies of scale are exhausted. C) the smallest number of firms that could effectively meet demand for an industry's output. D) the scale of operation by firms in an industry that is least efficient.
A car dealer that maintains a large number of automobiles on their lot so that they avoid losing a sale to another dealer who has the make and model a given customer wants is engaged in ________
A) production smoothing B) work in process C) stock-out avoidance D) first degree price discrimination
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her
home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Ziva's economic profit from farming equals a. $-130. b. $-80. c. $130. d. $170.
Which of the following is most consistent with supply-side policy?
A. The decrease in the growth of the money supply in 1994. B. The increase in the interest rate six times during 1999-2000 by the Fed. C. The Workforce Investment Act, which increased funds for skills training. D. The Budget Enforcement Act of 1990.