Which of the following combinations of changes in government spending and taxes in necessarily expansionary?
A) Increase/Increase
B) Increase/Decrease
C) Decrease/No change
D) Decrease/Increase
E) Decrease/Decrease
Ans: B) Increase/Decrease
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An economy could produce above its potential GDP for a short period of time by
A. reducing the size of the labor force. B. increasing the price of final goods and services. C. adding extra shifts of work, such as overtime or night shifts. D. increasing the money supply.
Stagflation refers to a situation in which the economy is experiencing:
A. high economic growth and high inflation. B. low economic growth and high inflation. C. high economic growth and low inflation. D. low economic growth and low inflation.
If the percentage change in price is 2 and the percentage change in quantity supplied is 10, supply is:
A. unaffected by price changes. B. inelastic. C. unit elastic. D. elastic.
Suppose you operate in a monopolistically competitive market. If you sell your good at a price of $10 and your average cost of production is $8:
A. your market is in long-run equilibrium. B. we can expect firms to enter your market and sell a similar good in the long run. C. there will be no incentive for competing firms to enter your market in the long run. D. you cannot be in short-run equilibrium.