Which of the following best explains the multiplier effect as a result of a $100 million increase in govt spending on highways?
A. More money must be printed to fund govt spending. Money supply increases, interest rates decrease, consumption increases, investment spending increases.
B. Change in spending will cause an increase in real GDP. Govt tax revenue increases so govt spending increases.
C. Govt spending creates a demand for domestically produced goods. Income increases, consumption increases, demand increases
D. Change in govt spending causes an increase in supply of jobs and stimulates production of domestically produced goods/services.
Ans: C. Govt spending creates a demand for domestically produced goods. Income increases, consumption increases, demand increases
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The figure above shows a perfectly competitive firm. If the market price is $20 per unit, then the firm produces ________ units and makes an economic profit that is ________
A) more than 30; more than $100 B) 30; more than $100 C) 20; less than $400 D) 0; zero E) 30; zero
Greater labor force participation for households at higher real wage rate is one reason that
A) the demand for labor curve is upward sloping. B) the demand for labor curve is downward sloping. C) the supply of labor curve is upward sloping. D) the supply of labor curve is downward sloping.