To an economist, theory can be thought of as
a. abstraction for the sake of argument.
b. one person's opinion, which is just as good as another's.
c. another term for the description of a situation.
d. beliefs which cannot necessarily be verified.
e. explanation of mechanisms behind observed phenomena.
e
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Suppose the economy is producing below potential GDP and the Federal Reserve implements the appropriate change in monetary policy, but not until after the economy has started to recover from the recession. In this situation there is a real danger that
A) the Fed's expansionary policy will result in too small of an increase in GDP. B) the Fed's expansionary policy will result in too large of an increase in GDP. C) the Fed's contractionary policy will result in too large of a decrease in GDP. D) the Fed's contractionary policy will result in too small of a decrease in GDP.
A business firm should refuse to sell any item for which it cannot obtain a price at least as large as what
A) it cost the firm to produce the particular item. B) it costs the firm on average to produce the item. C) it would cost the firm to produce another item identical to the item being sold. D) the item will be worth to the firm if not sold.