In the circular flow of income model injections:
a) Are assumed to be exogeneous (independent of national income)
b) Are assumed to be a function of national income
c) Decrease aggregate demand
d) Decrease the investment into an economy
Answer: a) Are assumed to be exogeneous (independent of national income)
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Which of the following statements concerning the short-run average cost curve of economic theory is true?
a. It is L-shaped b. It is ?-shaped c. It is ?-shaped d. It is ?-shaped e. It is M-shaped
Assume that the production of a good imposes external costs upon third parties. If the price and quantity of this good is set by supply and demand the price will be too:
a. high and quantity too low for efficient resource allocation. b. low and quantity too low for efficient resource allocation. c. low and quantity too high for efficient resource allocation. d. high and quantity too high for efficient resource allocation.
The expenditure category of GDP that fluctuates the most over time is investment
a. True b. False Indicate whether the statement is true or false
Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has more capital per worker and so it has more real GDP per worker than the other. Finally, suppose that the saving rate in both countries increases from 4 percent to 7 percent. Over the next ten years we would expect that
a. the growth rate will not change in either country. b. the country that started with less capital per worker will grow faster. c. the country that started with more capital per worker will grow faster. d. both countries will grow and at the same higher rate.