Refer to the diagram. If the full-employment GDP is Y 5 , government should:
A. incur neither a deficit nor a surplus.
B. cut taxes and government spending by equal amounts.
C. reduce taxes and increase government spending.
D. increase taxes and reduce government spending.
C. reduce taxes and increase government spending.
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A good may be inferior at some income levels and normal at others
What will be an ideal response?
Jamie and Danny both attend the same college and incur the same expenses for tuition, books, and school supplies. Jamie gave up a lucrative modeling job in Paris to attend school full-time and Danny gave up a part-time job as a sales clerk in a department store. It follows that: a. the opportunity cost of attending college is the same for both since they are enrolled at the same academic
institution. b. the opportunity cost of attending college is likely greater for Jamie than for Danny. c. the opportunity cost of attending college is likely greater for Danny than for Jamie. d. the opportunity cost is minimal for both since college graduates are paid much higher than high school graduates on average.
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?
a) the services of health care workers b) the services of military personnel c) the construction of new buildings d) goods and services produced in the underground economy
In the short run, why would a firm in a perfectly competitive market shut down production if the prevailing market price falls below the lowest possible average variable cost?
A. At that point (economic) profit is zero. B. Below that point average revenue becomes less than marginal revenue. C. Below that point marginal revenue becomes insufficient to pay for avoidable average variable cost. D. Below that point other firms with similar cost will find it profitable to enter the market and take away demand from the existing firms.