Why is opportunity cost a ratio?
What will be an ideal response?
The slope of the PPF is a ratio that expresses the quantity of lost production of the good on the y-axis to the increase in the production of the good on the x-axis moving downward along the PPF. The steeper the slope, the greater ratio, and the greater is the opportunity cost of increasing the output of the good measured on the horizontal axis.
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If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply, we would expect crowding out of investment and net exports brought about by the tax cut to be
A) increased as aggregate real income and output rise in the long run. B) unaffected by the shifting long-run aggregate supply curve. C) dependent upon the impact of this tax change on consumer disposable income. D) less than it would be without the supply-side effects.
In the absence of technological progress, we know with certainty that an increase in the saving rate will cause which of the following?
A) increase steady state consumption B) decrease steady state consumption C) have no effect on steady state consumption D) increase steady state consumption only if the increase in saving exceeds the increase in depreciation E) increase steady state consumption only if the increase in saving is less than the increase in depreciation