If a competitive market operates perfectly, it relies on:
A. the number of people buying goods.
B. the laws of supply and demand.
C. how many products can be produced for sale.
D. how much people are willing to pay for the products.
Answer: B
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Answer the following statement true (T) or false (F)
1) If the coefficient of cross elasticity of demand is positive, the two products are complementary goods. 2) An income elasticity coefficient of -1.8 means the product is a normal good. 3) A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes. 4) We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.
For this question, assume that there are decreasing returns to capital, decreasing returns to labor, and constant returns to scale. Now suppose that both capital and labor decrease by 5%. Given this information, we know that output (Y) will
A) not change. B) decrease by less than 5%. C) decrease by 5%. D) decrease by more than 5% but less than 10%. E) none of the above
Your parents surprise you with a $500 check. As a result, the U.S. GDP
A. remains unchanged because it was counted when your parents earned it. B. increases because this is unexpected income to you. C. decreases because you will spend it on useless goods. D. decreases because you have to pay taxes on this income.