Which of the following is TRUE with respect to specialization?
A) Adam Smith in The Wealth of Nations referred to specialization and division of labor.
B) With a given set of resources, specialization results in higher output.
C) Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization.
D) All of the above are correct.
Answer: D
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The term "crowding out" relates to the decrease in
A) consumption expenditure from an increase in investment. B) the real interest rate from a government budget deficit. C) private investment from a government budget deficit. D) saving from an increase in disposable income.
A tax-cut will have a greater effect on equilibrium GDP if the:
A. Marginal propensity to consume is smaller B. Marginal propensity to save is smaller C. Marginal propensity to save is larger D. Average propensity to consume is larger