Assume a diagram in which a budget line is imposed on an indifference map. A consumer will maximize her utility:
A. at any point where the budget line and an indifference curve intersect.
B. at either point where the budget line intersects the horizontal and vertical axes.
C. where the budget line is tangent to an indifference curve.
D. where the ratio of the two product prices equals the reciprocal of the consumer's income.
Answer: C
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A profit-maximizing farmer will apply additional units of fertilizer until the marginal revenue product (MRP) of fertilizer is half the MRP of skilled labor when a unit of fertilizer
a. costs twice as much as a unit of skilled labor. b. costs half as much as a unit of skilled labor. c. is half as productive, on average, as a unit of skilled labor. d. is twice as productive, on average, as a unit of skilled labor.
In reality, idle resources must exist in the economy in order for the multiplier process to lead to an increase in Real GDP
Indicate whether the statement is true or false
Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?
a. the unemployment rate and the inflation rate b. the unemployment rate but not the inflation rate c. the inflation rate but not the unemployment rate d. neither the inflation rate nor the unemployment rate
If the economy is in a recession, the actual deficit is ________ than the full employment deficit.
A. smaller than B. larger than C. equal to D. equal to or larger than