When a recession occurs, do economists expect it to be a temporary phenomenon? Or is there some degree of permanence? What is the empirical evidence?
What will be an ideal response?
Recent research suggests that recessions may contain permanent components. Some economists argue that only the 1973-1975 recession led to a permanent change in the U.S. economy, because it changed the economy's use of oil permanently. Other studies suggest that perhaps 30% of changes in real output are permanent and 70% are temporary for the postwar United States.
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In 1 hour, Robinson Crusoe can either shoot 4 birds or catch 4 fish. A typical native on a nearby island can either shoot 5 birds or catch 10 fish in an hour's time. Which of the following is true according to the doctrine of comparative advantage?
a. Crusoe will be better off if he specializes in either activity and then trades with the natives. b. The natives have a comparative advantage in both shooting birds and catching fish, so Crusoe cannot make himself better off by trading with the natives. c. Crusoe should concentrate on shooting birds and then trade with the natives to obtain fish. d. Crusoe should spend his time catching fish, and he should trade with the natives to obtain birds.
Why is it rational for individuals to be ignorant about public goods but not about private goods?
What will be an ideal response?
If hot dogs cost $2 this year and $3 next year, then 100 hotdogs will contribute
a. $200 to this year's nominal GDP and $166 to next year's nominal GDP. b. $200 to this year's real GDP and $300 to next year's real GDP. c. the same dollar amount to each year's nominal GDP because hotdogs are intermediate goods. d. $200 to this year's nominal GDP and $300 to next year's nominal GDP.
Points that lie outside the production possibilities curve are ________, and points that lie inside the production possibilities curve are ________.
A. efficient; inefficient B. attainable; unattainable C. unattainable; attainable D. inefficient; efficient