At a level of output equal to the economy's potential, the simple spending multiplier in the long run equals one
a. True
b. False
Indicate whether the statement is true or false
False
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Why is collusion about the price and amount of output impossible in monopolistic competition?
What will be an ideal response?
As real disposable income increases, consumption expenditures
A) increase by the same amount. B) increase by a smaller amount. C) increase by a larger amount. D) remain constant.
In the short run, why would a firm in a perfectly competitive market shut down production if the prevailing market price falls below the lowest possible average variable cost?
A. At that point (economic) profit is zero. B. Below that point average revenue becomes less than marginal revenue. C. Below that point marginal revenue becomes insufficient to pay for avoidable average variable cost. D. Below that point other firms with similar cost will find it profitable to enter the market and take away demand from the existing firms.
The U.S. economic data for the last 50 years indicates that
A. there has been no long-run relationship between unemployment and inflation rates. B. there is a direct relationship between unemployment rate and inflation rate. C. during recessions the unemployment rate was always twice as high as the inflation rate. D. there is an inverse relationship between unemployment rate and inflation rate.