If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?
A) Inventories will decline, and GDP and employment will decline.
B) Inventories will rise, and GDP and employment will rise.
C) Inventories will decline, and GDP and employment will rise.
D) Inventories will rise, and GDP and employment will decline.
D
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The demand for hamburgers is estimated from this theoretical model:
Q = kPaIbAce, where Q = units per day, P = price per unit, A = advertising budget per month by sellers, I = per capita income of consumers, and e = a random error. In a recent study, one researcher estimated the log-linear form of this equation with regression analysis as: log Q = 2.5 - 0.33 log P + 0.15 log I + 0.2 log A. Explain what the coefficients of log P, log I, and log A reveal about this product.
Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that: a. in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit. b. the man is behaving irrationally
c. the smoker is unconcerned about his future health. d. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.
What is the "right" degree of abstraction necessary to analyze an economic problem?
a. simple abstraction of only minor details b. simple abstraction of only irrelevant details c. total abstraction of all variables d. total abstraction of all irrelevant details e. There is no "right" degree of abstraction to analyze an economic problem.
Fixed prices in a free-market economy can increase efficiency
a. True b. False Indicate whether the statement is true or false