The assumption of diminishing marginal rate of substitution means that
A) the budget line has a negative slope.
B) the budget line does not shift when people's preferences change.
C) indifference curves might have a positive slope.
D) indifference curves will be concave.
D
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How are the following events likely to affect an economy's production possibilities curve?
a. An increase in the working population of the economy b. The import of better production technology c. A natural disaster that destroys some of the economy's resources d. Emigration of workers to other countries
To close a recessionary gap through fiscal policy, the government should
A) decrease government spending in order to increase aggregate supply. B) increase government spending in order to increase aggregate demand. C) reduce taxes in order to stimulate investment, and thus increase aggregate supply. D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply.