How are the following events likely to affect an economy's production possibilities curve?
a. An increase in the working population of the economy
b. The import of better production technology
c. A natural disaster that destroys some of the economy's resources
d. Emigration of workers to other countries
a. An increase in the working population of the economy implies an increase in the amount of resources available for production in the economy. Hence, the production possibilities curve will shift rightward.
b. The import of better technology implies that more can be produced with the amount of resources available in the economy. Hence, the production possibilities curve will shift rightward.
c. A natural disaster that destroys some of the resources available for production will lead to an inward shift of the production possibilities curve. This is because fewer resources are now available for production purposes.
d. If workers migrate to other countries, fewer workers will be available for domestic production. This will cause an inward shift in the economy's production possibilities curve.
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The long-run Phillips curve is consistent with
a. a negative relationship between unemployment and the rate of expected inflation. b. the expected real wage being equal to the actual real wage. c. the actual price level being equal to the expected price level. d. no relationship between inflation and unemployment. e. all of the above except a.
According the traditional Keynesian approach, an increase in government spending is effective in raising real Gross Domestic Product (GDP) if
A) the price level is fixed. B) the price level is flexible. C) the price level does not exist. D) Ricardian equivalence occurs, regardless of the price level.
Economic reasoning is based on the premise that: a. all decisions or actions are costless
b. only non-economic decisions or actions have a cost associated with them. c. only economic decisions or actions have a cost associated with them. d. all decisions and actions have a cost associated with them.
Which of the following is an example of a backward linkage?
a. A car industry creates a need for car dealerships. b. A compact disc industry creates a need for CD players. c. The development of a shoe industry creates a demand for a leather industry. d. An increase in the population increases the demand for food. e. New educational facilities improve the literacy rate of the population.