In the classical model, if money growth and velocity are constant, then:
a. the price level will rise at the rate of output growth.
b. the price level will be constant.
c. the price level will fall at the rate of output growth.
d. none of the above.
C
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Adam Smith’s discussion of the production in a pin factory illustrates the law of comparative advantage.
Answer the following statement true (T) or false (F)
Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer:
A. must be at an unattainable point on the production possibilities curve. B. can produce more of one good without producing less of the other good. C. must be specializing in activities for which it has a comparative advantage. D. cannot produce more of one good without giving up some of the other good.
Answer the following statements true (T) or false (F)
1. If society has over-allocated resources to a particular activity, then the marginal benefits of the activity would be less than the marginal costs. 2. A nation's production possibilities curve shows the maximum combinations of resources that a nation can use. 3. A reduction in the unemployment rate will cause the nation's production possibilities curve to shift outwards. 4. Economic growth is shown as an increase in production from inside the production possibilities curve out toward a point on the possibilities curve.
In the equation GDP = C + I + G + (X-M), "I" includes
A) Investments in items like stocks and bond B) Interest on savings accounts and other types of loans C) Income in the form of wages, rents, profits, and other sources D) Investments in items like structures and equipment