Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $800 billion, and the MPC is 0.50. What level of aggregate expenditures will close the recessionary gap?
A. $80 billion.
B. $140 billion.
C. $200 billion.
D. $400 billion.
Answer: C
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In the long run in monopolistic competition, a firm will not produce the output level that minimizes average cost because
a. that output level is less than the profit-maximizing one b. at that output level, MC is greater than MR c. at that output level, P is greater than MR d. demand is horizontal e. that would leave the firm with excess capacity
Who faces trade-offs?
A) individuals B) households C) governments D) all of the above
The Keynesian consumption function implies that at a given moment persons with high incomes are saving ________ persons with low incomes, a prediction which is ________ by actual cross-section consumption data
A) a lower fraction of income than, confirmed B) a lower fraction of income than, not confirmed C) a higher fraction of income than, confirmed D) a higher fraction of income than, not confirmed E) the same fraction of income as, confirmed
A recessionary gap can be defined as:
a. an economy that is operating above its full-employment capacity. b. an economy that is operating at full-employment capacity. c. the amount by which aggregate expenditures exceeds the aggregate expenditures level needed to generate equilibrium real GDP at full employment without inflation d. the amount by which aggregate expenditures falls short of the level needed to generate equilibrium real GDP at full employment without inflation. e. the easiest way out of a depression.