What are the simplifications used in this chapter to derive the aggregate expenditures model?
What will be an ideal response?
The assumptions used in this chapter to derive the aggregate expenditures model are based on the economic conditions of the Great Depression, and more specifically, on the inflexibility of prices. The chapter’s first stage is to assume a “closed” private economy with no international trade. The chapter then turns to an economy with international trade, or an “open” private economy. Finally, government is included in the final sections of the chapter. When government is included, then the economy will be a mixed economy with both public and private sectors and also will be an open economy.
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The above figures show the market for HD televisions. If cable television providers lower the price of providing HD cable service, which figure shows the effect of this change?
A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.
If demand is unit elastic, then
A) a ten percent increase in price leads to a one percent decrease in quantity demanded. B) the unit change in quantity demanded equals the unit change in price. C) a two percent increase in price leads to a two percent decrease in quantity demanded. D) an increase in price of any amount leads to quantity demanded falling to zero.
Which of the following is a feature of a customs union?
a. The agreement only affects trade among members. b. The agreement only affects trade with nonmembers. c. The agreement establishes free trade among its members and a common trade policy with nonmembers d. The agreement provides mere guidelines and does not obligate members to any given policy. e. The agreement prohibits all tariffs.
In response to the financial crisis of 2008, the federal government passed a ________ bailout bill.
A. $450 million B. $36 billion C. $700 billion D. $3 trillion