If an economy is at potential GDP and an expansionary policy is correctly anticipated, the result will be:
a. a short-run fall in output and employment
b. little or no increase in GDP.
c. an increase in wages along with a dramatic fall in the price level.
d. a rapidly expanding economy.
e. a severe recession.
b
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Increases in the stock of capital are the result of decreases in
A) net investment. B) depreciation. C) gross investment. D) all of the above.
What effect would a reduction in the U.S. selling price of Japanese-made cars have on the U.S. demand for American-made cars?
A) No effect, because price changes affect quantity demanded, not demand. B) The demand would decrease. C) The demand would increase. D) We cannot tell unless we know the elasticities of demand for Japanese-made and American-made cars. E) We cannot tell unless we know what happened to the price of American-made cars.
The above figure shows the market for steel ingots. If the market is competitive, and the government institutes a $100 specific tax on steel, then
A) less than the socially optimal quantity of steel is produced. B) the socially optimal quantity of steel of 50 units is produced. C) the socially optimal quantity of steel of 100 units is produced. D) more than the socially optimal quantity of steel is produced.
When a good is subsidized by the government, the amount of the good produced or consumed declines
a. True b. False Indicate whether the statement is true or false