Answer the following statements true (T) or false (F)
1) Graphically, the height of the investment schedule depends on the real interest rate, together
with the location of the investment demand curve.
2) In the aggregate expenditures model presented in the textbook, investment is assumed to rise
with increases in real GDP and fall with decreases in real GDP.
3) In the private closed economy, equilibrium GDP occurs where C + I g = GDP.
4) When C + I g = GDP in a private closed economy, S = I g and there are no unplanned changes
in inventories.
5) If C + I g exceeds GDP in a private closed economy, GDP will decline.
1) T
2) F
3) T
4) T
5) F
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Suppose the market-clearing price of milk is $3.00 per gallon, but the dairy industry persuades the government to establish a legally-mandated price support at $4.00 per gallon. The newly legislated price tends to
A) increase the supply of milk. B) reduce the demand for milk. C) increase the quantity supplied of milk. D) increase the quantity demanded of milk.
If it is less costly for business firms to adjust the labor demanded as the price level changes than it is for households to adjust Ns, then in the short-run
A) Ns has a positive slope and the demand for labor (Nd) negative slope. B) Nd has a negative slope and the supply of labor (Ns) a positive slope. C) AD has a negative slope. D) SAS has a positive slope.
If a firm offers a senior citizen discount,
A) the firm expects the average senior citizen to have a lower price elasticity of demand. B) the firm expects the average senior citizen to have a higher price elasticity of demand. C) senior citizens may be offended. D) it may be prosecuted for discrimination.
Which of the following is not true of an economic expansion?
a. The economy is overheated. b. There is too much spending. c. Production exceeds equilibrium output. d. The aggregate expenditure line is too low to create an intersection at full-employment output. e. Unemployment will be unusually low.