The existence of economic fluctuations makes it clear that
a. we should stimulate the economy with tax cuts
b. recessions are caused by shifts in labor supply
c. we should pass a balanced budget amendment to the U.S. Constitution
d. we need active monetary regulation
e. the classical model has a flaw
E
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Suppose the production possibilities for two countries, producing either food or clothing, are shown in the above figure. They can each produce any linear combination as well
Measuring food on the horizontal axis, the joint production possibility frontier has a horizontal intercept of A) 10. B) 20. C) 30. D) 50.
If you were to put the following effects of a decrease in demand into the sequence in which they occur, which would be last?
a. The demand curve facing each individual firm drops. b. Each firm reduces quantity supplied to the point where marginal cost equals its now-lower marginal revenue. c. In the short run, the market price drops. d. Market output falls. e. A short-run loss forces some firms out of business in the long run.