The paradox of excessive consumption argues that when households spend all they earn,
a. actual output and potential output will be in equilibrium.
b. the financial anxiety of families will be low.
c. the economy will achieve rapid, sustainable growth.
d. consumption can stagnate because families are in a poor position to deal with increases in debt and financial setbacks.
D
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Major macroeconomic questions include all of the following EXCEPT:
A. Can inflation be reduced without generating additional unemployment? B. Are free trade agreements beneficial? C. How do monopoly firms set prices and determine quantities to produce? D. What causes slowdowns in productivity growth?
One of the methods of reducing the geographical disadvantage faced by poorer countries is:
A) by moving to a socialist economic system. B) by undertaking large-scale disease eradication programs. C) by borrowing financial resources at market interest rates. D) by reducing participation in international trade.
In the circular flow model with the government sector, transfers
A) flow only through the goods market. B) flow in the same direction as do taxes. C) flow in the opposite direction as do taxes. D) to firms flow in the same direction as do rent, wages, interest, and profits. E) to households flow in the same direction as do expenditures on goods and services.
Decreasing returns to scale production functions must be concave.
Answer the following statement true (T) or false (F)