A small economy starts the year with $1 million in capital. During the course of the year, gross investment is $150,000 and depreciation is $50,000. How big is the economy’s stock of capital at the end of the year?
A. $1,000,000
B. $1,100,000
C. $1,150,000
D. $800,000
E. $850,000
Ans: B. $1,100,000
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Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. What of the following could result in a movement to point b?
A) an increase in the price of bottled water B) a decrease in the price of bottled water C) an increase in the opportunity cost of soft drinks D) a decrease in the relative price of a soft drink
A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market
Indicate whether the statement is true or false
The LM curve shows a series of income-interest rate combinations at which there is equilibrium in the
A) bond market. B) goods market. C) saving-investment market. D) money market.
Changes in relative prices may occur
A. Only in periods of stable prices. B. In periods of stable prices or in periods of inflation or deflation. C. Only in periods of inflation or deflation. D. In none of the other choices.