Scarcity forces society to confront three critical issues. List those issues and explain how they are related to the problem of scarcity.
What will be an ideal response?
What to Produce: When we produce more of one good, we use up scarce resources. This reduces our ability to produce other goods.
How to produce goods: Society must determine a production method for each good that minimizes the use of the scarce resources used to produce the good.
Who gets what: A society can produce only a limited amount of goods and services. Each society must therefore develop procedures for allocating those goods among consumers.
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According to classical theory, a shift in aggregate demand will affect
A) the price level only. B) real Gross Domestic Product (GDP) only. C) the level of employment only. D) both real Gross Domestic Product (GDP) and the level of employment.
Suppose that there are only two countries in the world, Heartland and Soulland. The two countries produce only two goods, corn and drill presses. At its current level of production, Heartland must give up production of 1/4 drill press to produce an additional 100 bushels of corn. Soulland must give up 1 drill press to produce an additional 100 bushels of corn. No trade now occurs between the two economies, and both economies are operating on their respective production possibilities frontiers. 89. (Exhibit: Heartland and Soulland) The country with a comparative advantage in the production of corn is:
A) Heartland. B) Soulland. C) neither; they both use the same technology. D) neither; they both use the same amount of resources.
The expected value of an investment:
A. cannot be determined in advance. B. is what the owner will receive when the investment is sold C. is the probability-weighted sum of the possible outcomes. D. is the sum of the payoffs.
In 1971, President Richard Nixon announced a 90-day freeze on wage and price increases in order stabilize prices.
Answer the following statement true (T) or false (F)