How would economic growth be shown in a production possibilities graph and in a graph of long-run aggregate supply?
What will be an ideal response?
In the production possibilities graph, economic growth would be shown by a rightward or outward shift in the production possibilities curve, indicating that the economy can obtain more of both consumer goods and capital goods. In the aggregate demand and aggregate supply graph, economic growth would be shown by a rightward shift in the vertical long-run aggregate supply curve, with the amount of the shift representing the increase in real GDP.
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If the rate of growth in real GDP exceeds the rate of growth in the money supply, the quantity theory of money predicts a price deflation
Indicate whether the statement is true or false
Which of the following is true of nominal GDP?
a. It acts as an indicator of the general price level in the economy. b. It measures the real level of output in the economy. c. It measures national output based on the current year's prices. d. It tends to rise by a smaller amount than real GDP when the general price level increases. e. It measures changes in the output of intermediate goods and services.
Professor Plum, who earns $100,000 per year, read in the paper today that the university pays its basketball coach one million dollars per year in exchange for his agreement to remain at the university for at least three more years. The coach earns more than Professor Plum because:
A. the demand for sporting events exceeds the demand for college degrees. B. universities value sports more than academics. C. the coach has more human capital than does Professor Plum. D. the coach is able to earn economic rent due to his unique talents.
The definition of gross domestic product is
A. the total value of all sales in the economy. B. the total value of production in the domestic economy plus the production of domestic firms in foreign countries. C. the total value of all sales of final and intermediate goods in the domestic economy. D. the total of the money values of all final goods and services produced in the domestic economy within a specific time period.