"Because resources are scarce, the production of more capital goods means that fewer resources are available to produce consumption goods, so there is less current consumption." Do you agree or disagree? Explain
What will be an ideal response?
Agree. Capital goods are goods that are used to produce other goods rather than for the sake of current consumption. The resources used to make capital goods are not available to produce current consumption goods, so there is less current consumption.
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In the classical model, real Gross Domestic Product (GDP) per year is
A) determined by supply and demand conditions together. B) supply determined. C) demand determined. D) due to supply conditions plus the extent of government intervention in the economy.
Which of the following is a method used by government to cope with the situation in which production of a good creates an external benefit?
A) removing property rights B) subsidizing production C) marketable permits D) running a lottery E) imposing Coasian taxes