Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government wants to move the economy back to the full-employment level of output and the MPC is 0.75, then it should
A. reduce government purchases by $100.
B. reduce government purchases by $200.
C. reduce government purchases by $50.
D. reduce government purchases by $25.
Answer: C
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Which of the following industries would be considered to have a capital intensive production process?
A. Auto manufacturing B. Farming in a poor country C. Writing a novel. D. Art restoration.
In recent years, people have benefited from greater amounts of leisure time. This trend:
a. has caused GDP to rise. b. has caused GDP to fall. c. made GDP fluctuate randomly. d. is not accounted for in GDP.
The United States was running a large balance-of-trade deficit
a. during the Depression years of the 1930's. b. in the years following World War II. c. in the early 1960's. d. from the late 1970's through the 1990's.
Which of the following statements is not correct?
a. Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. b. Marginal cost is always less than average total cost in a natural monopoly. c. Discount coupons available free to the public are a type of price discrimination. d. Anti-trust laws make it harder for firms to create synergies.