Answer the following questions true (T) or false (F)
1. At a long-run macroeconomic equilibrium, real GDP is always equal to potential GDP.
2. Stagflation occurs when short-run aggregate supply decreases.
3. An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.
1. TRUE
2. TRUE
3. FALSE
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The service a homeowner performs when she mows her yard is not included in GDP because ________.
A. multiple counting would be involved B. this is a noninvestment transaction C. this is a nonproduction activity D. this is a nonmarket transaction
Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar from the tenth slice of pizza and 200 units of utility per dollar from his second soda
Is Abe maximizing his utility? Should Abe change his consumption of pizza and soda?
Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to
a. increase. b. decrease. c. remain unchanged. d. increase if the demand for computers was relatively inelastic, but decrease if the demand for computers was relatively elastic.
When a monopolist increases output, total revenue will:
A. decrease if the quantity effect outweighs the price effect. B. increase if the price effect outweighs the quantity effect. C. increase but it will have no price effect. D. increase if the quantity effect outweighs the price effect.