Explain how a reservoir can serve as an analogy for thinking about a nation’s capital stock, investment, and depreciation
What will be an ideal response?
The amount of water in a reservoir is a “stock.” It is similar to the stock of capital goods in an economy. The inflow of water to the reservoir is a “flow” and would be similar to gross investment. The outflow of water from the reservoir is also a “flow” and it is similar to depreciation. If the inflow is greater than the outflow, then gross investment is greater than depreciation so there is an addition to the capital stock, or net investment. If the inflow of gross investment is less than depreciation, there is a decline in the capital stock, or negative net investment.
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Nominal gross domestic product is based on the existing prices at which final goods are actually sold
a. True b. False Indicate whether the statement is true or false
An economist might say that people choose not to get a college degree because they may have to borrow money to go to college, and the interest they have to pay on that loan in the future will affect their decisions today. This is an example of which kind of statement?
a. positive statement b. normative statement c. trade-off statement d. allocative statement
For a profit-maximizing monopolistically competitive firm, for the last unit sold, the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit
Indicate whether the statement is true or false
An increase in the marginal tax rate, with the average tax rate held constant, will
A) increase the amount of labor supplied at any real wage. B) not affect the amount of labor supplied at any real wage. C) decrease the amount of labor supplied at any real wage. D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate.