Suppose output is $35 billion, government purchases are $10 billion, desired consumption is $15 billion, and desired investment is $6 billion. Absorption is equal to
A. $25 billion.
B. $39 billion.
C. $35 billion.
D. $31 billion.
Answer: D
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The opportunity cost of holding money
A) refers to the amount of paper currency held by the Fed. B) is measured by the alternative interest yield obtainable by holding some other asset. C) is based on the fiduciary monetary system. D) refers to the Fed's role as the lender of last resort.
The increase in output that is generated by an additional unit of input is called the:
A. input-output relationship. B. production function. C. resource product. D. marginal product.
A customs union is an organization of nations whose members:
a. have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers. b. have no trade barriers among themselves but impose common trade barriers on nonmembers. c. have no trade barriers among themselves but each member country chooses its own trade policies with nonmember countries. d. retaliate each other by raising reciprocal tariffs and calling for fair trade. e. neither have trade barriers among themselves nor impose any restriction on the nonmember countries.
An appropriate government policy toward negative externalities is to
a. subsidize the activity that creates the negative externality. b. impose a tax or fine on the activity that creates the negative externality. c. pay money to the party that creates the negative externality. d. impose a tax on recipients of the negative externality.