When economic growth occurs, the
A) economy moves along its production possibilities frontier.
B) production possibilities frontier shifts outward.
C) production possibilities frontier becomes steeper.
D) production possibilities frontier shifts outward but no longer limits the amount that can be produced.
B
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Assume that the government decides to use fiscal or monetary policy to stimulate the economy and that this action comes as a surprise to most individuals and businesses. In the short run, the result will be
A) an increase in aggregate demand and a fall in the price level. B) a decrease in aggregated demand and a rise in the price level. C) a decrease in the average duration of unemployment and a decrease in the unemployment rate. D) an increase in the average duration of unemployment and an increase in the unemployment rate.
Refer to the above figure. An external benefit exists. The amount of that benefit is represented by
A) P4. B) the vertical distance between D1 and D2. C) the distance between G and F. D) P3.