The circular flow diagram is best described as a(n)
a. abstraction of little value in macroeconomics.
b. exact representation of the cause and effect relationship between spending and employment.
c. model that clarifies the relationship between spending and income.
d. model to explain the relationship between the federal deficit and tax revenues.
c
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In the expansion phase of a business cycle
A. the inflation rate and productive capacity decrease. B. employment increases, but output decreases. C. the inflation rate decreases, but productive capacity increases. D. employment and output increase.
A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________, everything else held constant
A) raises; LM; right B) lowers; IS; left C) raises; IS; right D) lowers; LM; left
Points inside the production possibilities frontier represent
a. full and efficient use of all resources b. inefficiency or unemployment (or both) c. currently unattainable combinations of outputs d. currently unattainable combinations of resources e. the most desirable combinations of outputs
Which of the following is a reason why aggregate supply decreased following the housing bubble collapse?
A. Businesses could not access credit to carry out their daily operations. B. Consumption decreased. C. People stopped investing in homes. D. Government tax rates were altered as a response to change in aggregate output.