The circular flow model is an abstract representation of the interaction between households and firms through the institutions of
a. government and financing outlets
b. church and state
c. property and law
d. resource and product markets
e. trade and conflict
D
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A depreciation of a country's currency always lowers the domestic firm's profits
Indicate whether the statement is true or false
Typically during a recession
A) incomes fall, and unemployment falls. B) incomes and unemployment rise. C) incomes fall, and unemployment rises. D) incomes increase, and unemployment falls.
Which of the following is true in both perfect competition and monopoly?
a. Firms produce a differentiated product. b. Firms cannot earn economic profit in the long run. c. Individual firms have no ability to control the price of their output but must accept the market price. d. Firms go out of business in the long run if total revenue cannot cover total cost. e. Firms can earn economic profit in the long run.
The strict crowding-out argument relies on the assumption that
A. the government must raise taxes to pay for spending, and the tax increase crowds out the stimulative effect of increased spending. B. the total flow of saving is a fixed amount. C. investment is invariant to interest rates, but very dependent on aggregate spending. D. consumption will rise to absorb most of an increase in income, and investment will accordingly fall.