"Similar to imports, U.S. exports depend on the level of U.S. real GDP so that if real GDP increases, U.S. exports increase." Explain whether the previous sentence is correct or incorrect
What will be an ideal response?
The sentence is incorrect along two dimensions. First, U.S., exports do not depend on U.S. real GDP. Indeed, U.S. exports are part of autonomous spending. Second, because U.S. exports do not depend on U.S. real GDP, they definitely do not increase when U.S. real GDP increases.
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Differentiate between the quantity effect and price effect of a price cut by a monopoly
What will be an ideal response?
Changing the price of good Y will
A. only affect the demand for that good. B. have effects across some markets. C. keep prices down in all markets. D. have no effect.
The oligopoly market structure model is characterized by:
a. many firms in an industry producing differentiated products. b. many firms in an industry producing identical products. c. few firms in an industry with natural barriers to entry. d. a single firm in an industry with barriers to entry. e. many firms in an industry with barriers to entry.
Everything else being equal, a higher interest rate
a. increases consumption spending as people face increasing debt b. reduces consumption spending as people have a greater incentive to save c. does not change consumption spending because consumption is only affected by income d. does not change total consumption spending, but does change who does the spending e. reduces both consumption spending and saving as people face increased debt