The marginal rate of substitution is
A. equal to unit changes in the quantities of both goods so that utility rises.
B. found by adding additional units.
C. the slope of the budget line at all points.
D. the change in the quantity of one good that just offsets a unit change in another good, keeping utility constant.
Answer: D
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If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n) ________ gap and the Federal Reserve must ________ real interest rates in order to close the gap.
A. expansionary; raise B. recessionary; raise C. recessionary; not change D. recessionary; reduce
A firm’s price is
A. greater than average revenue. B. greater than marginal revenue. C. less than marginal cost. D. equal to average revenue.
The AE curve illustrates the relationship between
A) real GDP and actual expenditure. B) the interest rate and aggregate planned expenditure. C) real GDP and the interest rate. D) aggregate planned expenditure and real GDP. E) the quantity of real GDP demanded and the price level.
A decrease in government spending will result in a decrease in the price level and a decrease in real GDP in the long run
Indicate whether the statement is true or false