Assume that the marginal propensity to consume in an economy is 0.9. If the economy's full-employment real GDP is $500 billion and its equilibrium real GDP is $550 billion, there is an inflationary expenditure gap of
A. $5 billion.
B. $500 billion.
C. $100 billion.
D. $50 billion.
Answer: A
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Marginal social cost is equal to
A) the amount people who buy a product pay for another unit. B) whatever producers have to pay to produce output. C) the sum of marginal private cost and the marginal external cost. D) the average of marginal private cost and the marginal external cost. E) None of the above answers is correct.
The two big problems facing insurance companies in trying to manage risk are:
A. risk pooling and diversification. B. risk pooling and adverse selection. C. adverse selection and moral hazard. D. moral hazard and diversification.
According to classical economists, market-driven economies
A. Are inherently unstable. B. Require government intervention. C. Are always in long-run equilibrium. D. Are typically self-adjusting.
Christopher needs to hire an accountant but does NOT know how to find a good one. The accountant can best be regarded as a(n)
A. experience good. B. credence good. C. inferior good. D. search good.