What are the economic functions of the government?
What will be an ideal response?
-Allocative resources
-Redistributive
- Stabilization-(high employment, stable prices, steady economic growth)
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When actual output exceeds potential output, there is ________ output gap and the inflation rate will ________.
A. an expansionary; be lower than the expected rate of inflation B. no; be equal to the expected rate of inflation C. an expansionary; exceed the expected rate of inflation D. a recessionary; exceed the expected rate of inflation
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
Which of the following statements does NOT correctly characterize normal profit?
A) It is part of a firm's opportunity cost. B) It is equal to a firm's total revenue minus its opportunity cost. C) It is the average return for supplying entrepreneurial ability. D) None of the above because all the statements correctly characterize normal profit.
Explain why returns on assets compensate for systematic risk but not for idiosyncratic risk.
What will be an ideal response?