Refer to Figure 11.3. Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion. The aggregate demand shortfall is equal to the distance between
A. Point a and point e.
B. Point a and point b.
C. Point b and point e.
D. Point a and point d.
Answer: A
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The Solow residual helps explain growth that derives from
a. increasing the size of the labor force. b. increasing the size of the capital stock. c. increasing the capital-labor ratio. d. anything except increases in the size of the labor force or the capital stock.
An external cost, such as the cost generated by pollution, is
A) a cost paid by consumers of the product. B) a cost paid by producers of the product. C) a cost paid by a third party or by society at large. D) not a true opportunity cost of production.
Keynes once remarked that, in the long run, we're all dead. He was responding to the conventional wisdom of classical economics who argued that:
a. the supply curve should remain vertical in the long run. b. World War I was fought to free Britain from economic ruin. c. depression was only a short-run, temporary departure from full-employment equilibrium. d. funeral plots need to be determined by the market. e. market-based realities cause the estate tax to be too high.
Most of the total income earned in the U.S. economy is ultimately paid to
a. households in the form of wages and fringe benefits. b. landowners in the form of rent. c. landowners in the form of interest. d. landowners in the form of profit.