Classical macroeconomic theorists believed that the economy would recover on its own from an economic downturn because:
A. falling wages would lead prices to fall, which, in turn, would spur consumer spending.
B. falling wages would lead consumers to spend less and save more.
C. rising wages would lead prices to rise, which, in turn, would lead consumers to spend less.
D. higher prices would lead wages to rise, which, in turn, would spur consumer spending.
Answer: A
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a. International agreements and treaties between countries have encouraged greater trade. b. Expanding cultural connections between people around the world. c. Expanding economics connections between people around the world. d. Increased military spending.
Describe how monopolists use barriers to entry to maintain their pricing power.
What will be an ideal response?
Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
Carefully define the following terms, and explain their importance in economics
a. opportunity cost b. abstraction c. theory d. model e. marginal analysis