Assume the marginal propensity to save is 0.10. Firms become optimistic and increase investment spending by $10 billion. Other things being equal, real GDP will:
A. increase by $1 billion.
B. not change.
C. increase by $10 billion.
D. increase by $100 billion.
Answer: D
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Asset-price bubbles ________
A) are a relatively recent phenomenon B) end with an increase in asset prices C) have been a feature of market economies for centuries D) are likely to be prevented by advances in computer technology and telecommunications
Explain why a firm may hire managers to operate outlets near the firm's headquarters, but may sell franchise rights for the outlets located greater distances from the headquarters
(With a franchise, the firm sells a brand name and a method of doing business to someone who then owns and operates the outlet.)
What do economists mean by rationality?
________ is an increase in the price level, while ________ is an increase in the price of one good in comparison to other goods and services.
A. A relative price increase; inflation B. Hyperinflation; inflation C. Inflation; a relative price increase D. Inflation; hyperinflation