The "investment" component of aggregate demand will include all of the following except
a. expenditures of business firms on new plants.
b. expenditures of business firms on new equipment.
c. resales of existing physical assets.
d. household spending on new homes.
c
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Any firm, competitive or not, desiring to maximize profits, will choose its quantity according to the rule, produce that quantity at which
a. marginal revenue = price. b. marginal revenue = marginal cost. c. average variable cost is at its minimum. d. marginal cost is at its minimum.
A ____________ exchange rate policy is where the central bank will intervene as needed in the market to keep the currency value from moving rapidly in one direction.
a. soft peg b. floating c. hard peg d. defined
Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?
a. Lower wage rates and resource prices reduce short-run aggregate supply. b. Lower interest rates increase aggregate demand and, thereby, stimulate output. c. Higher wage rates and resource prices reduce short-run aggregate supply. d. A decrease in prices reduces aggregate demand.
Suppose that one could determine the amount of income that is pure economic rent. If a law were passed that taxed 50 percent of that rent, what would happen to the amount of work that people perform?
A. It would increase as people seek higher income. B. It would be unchanged. C. It would decrease as people suffer a loss of income. D. It would increase for some and decrease for others.