The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output.
B. government policy.
C. decreasing inflation only.
D. increasing or decreasing inflation.
Answer: D
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Refer to Table 11.1. If exports increase by 20 (X = 100), what is the new equilibrium level of output?
A) 1,825 B) 2,425 C) 7,300 D) 9,700
In the long run, an increase in government spending, other things equal, generates
A) a higher real GDP in the long run. B) a lower real GDP in the short run. C) a higher price level. D) both a higher real GDP and a lower price level.
In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm: a. has no incentive to change its output
b. has no incentive to change its plant size. c. has no incentive to expand its factory. d. has no incentive to leave the industry.
If the MPC is 0.8, and the government spends an additional $100b, the overall effect on GDP will be:
A. $400b. B. $500b. C. $120b. D. $180b.