Explain why decreases in inventories are included as a negative number in gross private domestic investment
Decreases in inventories represent sales of goods that were produced in some past year. The sale of these
goods show up as consumption expenditures, government purchases, or net exports, and thus overstate
production in the current year. To adjust GDP to exclude the sale of these goods, their value is subtracted
from gross private domestic investment.
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An economic model is a detailed version of an economic environment
Indicate whether the statement is true or false
The inverse supply curve of coffee beans equals P = -5 - 2rain + Qs, where rain equals the number of inches of rain per year. How much does quantity supplied change when rain increases from 30 inches to 40 inches per year?
A) Qs decreases by 40. B) Qs increases by 40. C) Qs increases by 30. D) Qs decreases by 30.
Answer the following statement(s) true (T) or false (F)
1. A competitive firm will exit an industry in the long run if the market price falls below the firm's break-even price. 2. For a competitive firm with a downward sloping marginal cost curve, the supply curve and the marginal cost curve look exactly the same 3. There is no reason for a competitive firm to stay in business if it is making zero economic profit. 4. A decrease in firms’ variable costs will cause the output of the market to decrease. 5. A technological advance that reduces firms’ variable costs will lead to higher profits in the long run of a perfectly competitive industry.
Figure 32-3
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Figure 32-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money. If the Federal Reserve does not want interest rates to rise, it will
A. shift the money supply curve to the right by monetizing the deficit. B. shift the money supply curve to the left by open-market sales of government securities. C. maintain the current targets for both M1 and M2 money stocks. D. engage in contractionary monetary policy, such as increases in the discount rate.