If the Gross Domestic Product (GDP) in the United States increases, which of the following will probably result?
a. Employment levels will increase.
b. Employment levels will remain flat.
c. Unemployment rates will increase.
d. Wages will increase.
Answer: a. Employment levels will increase.
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The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the
A) quantity of oil demanded will result from a 0.5 percent increase in the price of oil. B) quantity of oil demanded will result from a 0.5 percent decrease in the price of oil. C) price of oil will increase the quantity of oil demanded by 0.5 percent. D) price of oil will decrease the quantity of oil demanded by 0.5 percent.
The figure illustrates aggregate demand and aggregate supply in Sparta. Which of the following events will decrease Sparta's real GDP in the short run?
A) a decrease in taxes B) a fall in resource prices C) a decrease in government expenditure D) an increase in investment
Vertical contracts between manufacturers and retailers often aim to
a. Prevent the retailers from defeating upstream price discrimination through arbitrage b. Reward the manufacturer for undertaking the risk inherent in introducing a new product c. Serve as a "signal" of the retailer's belief of the likely success of his product d. All of the above
Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.50, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending). If an increase of $1,000 billion aggregate demand can restore full employment, the government should:
a. increase spending by $250 billion. b. decrease spending by $500 billion. c. increase spending by $1,000 billion. d. increase spending by $500 billion.