Where MPC is the marginal propensity to consume, the formula for the spending multiplier is
What will be an ideal response?
1/MPC.
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Monopolistic competition is characterized by firms
A. producing differentiated products. B. producing where price equals marginal cost. C. making economic profits in the long run. D. producing at optimal productive efficiency.
Decreased investment spending in the economy would be a possible result of
A) an open market sale of bonds by the Fed. B) an increase in the money supply. C) an open market purchase of bonds by the Fed. D) a decrease in interest rates.
The cycle of ________ market demand that leads to ________, and then an increase in the market supply curve has caused many firms bankruptcy.
A) decreased; overexpansion B) decreased; increased firm level production C) increased; overexpansion D) increased; underexpansion
Why is the production possibilities frontier concave to (bowed away from) the origin?
A) Consumers have declining marginal utility, so their relative satisfaction from consuming a good changes as they move from high levels to low levels of consumption. B) The shape of the curve is due to the marginal costs of producing the two goods. At high levels of output for a particular good, the marginal cost is very high, and the firm can use the same inputs to produce a relatively large quantity of the other good. C) For a production possibilities frontier, we no longer assume firms are price takers, and the input prices and output prices change as the firms alter their mix of outputs. D) none of the above