On a production possibilities frontier diagram, where are production points that have tradeoffs? Where are production points with a free lunch?
What will be an ideal response?
A tradeoff is a situation in which a limit forces one thing to be given up in exchange for something else. Any point on the production possibilities frontier itself is a production point with a tradeoff. Why? Moving along the production possibilities frontier means that more of one good can be obtained only at the (opportunity) cost of giving up some other good, which means that there is a tradeoff. A free lunch is the absence of a tradeoff, that is, when the production of a good or service can be increased without decreasing the production of another good or service. A free lunch occurs at any point within the production possibilities frontier. At these points, resources are being used inefficiently. By utilizing the resource efficiently, more goods or services can be produced without giving up any other goods or services.
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Which of the following statements are correct? In (the)
a. Keynesian model, unemployment is voluntary. b. real business cycle models, all unemployment is voluntary. c. new classical models, there is voluntary unemployment. d. Both b and c e. All of the above
The sum of the MPC and the MPS is always:
a. greater than 1. b. less than 1. c. equal to 1. d. equal to zero. e. between 0 and 1.
Explain why the U.S. government might attempt to depress the exchange rate of the U.S. dollar.
What will be an ideal response?
The primary legislative branch of the European Union is called the
A) European Commission. B) European Parliament. C) European Council of Ministers. D) Council of the European Union.