If one is producing well within a production possibilities frontier, they are
A) using resources to the best of their ability.
B) using resources at the lowest opportunity cost.
C) using resources in an inefficient way.
D) using resources in a way that maximizes their comparative advantage.
C
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
What is meant by the term "rational ignorance"?
A) It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view. B) It refers to the absence of a negative incentive, such as levying a fine for not voting, which results in low voter turnout. C) It refers to a situation where one policymaker deliberately approves legislation he does not support in exchange for a future favorable vote for his own cause. D) It means the lack of an economic incentive for voters to become informed about a pending vote.
Which of the following statements about the tax cut enacted in 1981 is correct? a. The tax cut caused the recession of 1982
b. The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time. c. The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982. d. The tax cut was opposed by supply-side economists. e. The tax cut was favored by Congress but opposed by the President and passed over his veto.
Higher price levels will eventually lead to lower interest rates as people reduce their demand for money
a. True b. False Indicate whether the statement is true or false