The production possibilities curve demonstrates the basic economic principle that
a. economies are always efficient
b. assuming full employment, supply will always determine demand
c. assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater than the production of consumption goodsin that year
d. assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good
e. the production of more consumption goods this year requires the production of morecapital goods this year
D
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According to the Keynesian theory, inflation
a. can occur at any level of employment. b. can occur only with government spending. c. can occur when aggregate expenditure exceeds output at full employment. d. will occur when planned investment is below planned saving at full employment.
Figure 10-2
In Figure 10-2, which segment of the aggregate supply curve has the smallest multiplier effect?
a.
AB
b.
BC
c.
CD
d.
DG
The following list contains factors that are related to the aggregate demand curve.1)Household expectations 2)Profit expectations 3)Degree of excess capacity 4)Personal income tax rates 5)Exchange rates 6)National income abroad 7)Government spending 8)Household wealth Changes in which three of the above factors would most likely cause a change in consumer spending?
A. 1, 2, and 6 B. 3, 5, and 7 C. 1, 4, and 8 D. 5, 6, and 7
The crowding-out effect refers to the tendency of expansionary fiscal policy to
A) cause decreases in planned investment or planned consumption. B) cause households to save less. C) replace low-skilled labor with higher-skilled labor. D) cause firms to produce beyond capacity.