Suppose the economy is in equilibrium when business firms decide to increase investment spending by $100 billion. According to the short-run macro model, what would be the effect on equilibrium real GDP?
a. There would be no effect; the increased investment spending would be offset by decreased spending in other sectors.
b. It would increase by $100 billion.
c. It would increase by more than $100 billion.
d. It would increase, but by less than $100 billion.
e. It would decline by $100 billion.
C
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A major problem with using the egalitarian principle to distribute income is that
A) it would eliminate the incentives that rewards provide in an economic system. B) it is difficult to know when an equal distribution of income has been achieved. C) it would not be fair to the wealthy. D) there exist no mechanisms to carry out such a scheme.
If an economy is operating at short-run equilibrium below the level of real GDP, the self-correction model result is that: a. unemployment increases
b. unemployment falls. c. cyclical unemployment increases. d. frictional and structural unemployment increase.
The main difference between a firm that is a price searcher and a firm that is a price taker is that a
a. price searcher produces products that are identical to its competitors' products. b. price taker can decide what price to charge for its product. c. price searcher cannot decide what price to charge for its product. d. price searcher will still be able to sell some of its product if it increases its price.
Macroeconomics is concerned with the whole economy or its major sectors.
Answer the following statement true (T) or false (F)