Which of the following represents a long-run adjustment?
A. A farmer uses an extra dose of fertilizer on his corn crop.
B. Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch
plants.
C. A steel manufacturer cuts back on its purchases of coke and iron ore.
D. A supermarket hires four additional clerks.
Answer: B
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Some of the crowding out of private expenditures may come in the form of
A) an increase in consumption. B) an increase in net exports. C) a decrease in taxes. D) a decrease in net exports.
Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will:
A. decrease solely because of the substitution effect. B. increase solely because of the substitution effect. C. increase solely because of the output effect. D. decrease solely because of the output effect.