In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. If there is no policy intervention, we should expect ________
A) rightward shifts of IS & AD, so that both output and inflation rise
B) a decrease in inflation to shift the MP curve, raising the real interest rate
C) declines in both the inflation rate and the real interest rate as output rises
D) a decrease in inflation to shift the AD curve, causing output to rise
E) none of the above
C
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Refer to the above figure. If real GDP is $4 trillion, then
A) actual investment spending equals $1 trillion as planned investment spending plus unplanned inventory increases equal $1 trillion. B) consumption expenditures are too low. C) unplanned inventories will decrease. D) unplanned inventories will increase.
John's utility of wealth curve is shown in the above figure. He currently has wealth of $20,000. If the state lottery offers a 1 in 10,000 chance of winning $10,000, John will
A) pay whatever price it takes to play. B) pay $1 to play this game. C) pay less than $1 to play this game. D) not be willing to play this game at any price.
A perfectly elastic long-run supply curve indicates
A) a decreasing-cost industry. B) a constant-cost industry. C) an increasing-cost industry. D) that some input prices change as firms enter and exit the industry.
Additional firms often do not try to compete with a natural monopoly because
a. they fear retaliation in the form of pricing wars from the natural monopolist. b. they are unsure of the size of the market in general. c. they know they cannot achieve the same low costs that the natural monopolist enjoys. d. the natural monopoly does not make a large profit.