Why is the multiplier principle important?
What will be an ideal response?
It shows why small shifts in investment have a powerful influence on national income
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In the past two decades the United States lost its comparative advantage in automobiles to Japan. What factor was most responsible for the development of Japan's comparative advantage in automobiles?
A) Japan has abundant supplies of natural resources needed to produce automobiles. B) Japanese firms benefited from external economies. C) Japanese firms excelled in process technology. D) Japan has abundant supplies of labor.
Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP
Indicate whether the statement is true or false
Which of the following is characteristic of the marginal revenue product schedule for a resource?
a. It approximates the firm's demand curve for the resource. b. It measures the change in total revenue resulting from employing an additional unit of the resource. c. It is determined by multiplying the marginal product of the resource by the marginal revenue of the good produced. d. All of these are true.
Suppose there is an increase in the price of oranges. Which of the following is a possible cause?
a. increase in income b. increase in the price of sugar, a complement of oranges c. decrease in the price of tangerines, a substitute for oranges d. freeze in Florida e. favorable weather pattern