In the short-run macro model, planned investment is defined as
a. plant and equipment purchases by business firms plus inventory changes
b. plant and equipment purchases by business firms plus new home construction
c. plant and equipment purchases by business firms
d. new home construction plus inventory changes
e. inventory changes
B
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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
A cartel is a collusive agreement among a number of firms that is designed to
A) expand output and lower prices but not to a predatory level. B) restrict output and lower prices to a predatory level. C) restrict output and raise prices. D) expand output and raise prices. E) expand output and lower prices to a predatory level.
Assume a perfectly competitive firm is producing 500 units of output, P = $7, ATC of the 500th unit is $6, marginal cost of the 500th unit = $7, and AVC of the 500th unit = $5. Based on this information, the firm is:
A) earning an economic profit of $500. B) earning an economic profit of $1,000. C) incurring a loss of $500. D) incurring a loss of $1,000.
Refer to the above figure. If the relevant aggregate demand curve is AD2, what is the current economic situation?
A. overemployment B. inflationary gap C. recessionary gap D. equilibrium