If an economy is allocatively efficient, it must be producing
A) beyond its production possibilities frontier.
B) inside its production possibilities frontier.
C) on its production possibilities frontier.
D) the goods and services that are the most expensive.
E) the goods and services that are the least expensive to produce.
C
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If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP, then
A) the economy is in an expansion. B) actual inventory investment will be less than planned inventory investment. C) actual inventory investment will be greater than planned inventory investment. D) the economy is at full employment.
Empirically, there is a close positive relationship between domestic savings and investment. This is consistent with what we should expect to observe in
a. a closed economy. b. the Mundell-Flemming model with perfect capital mobility. c. the Mundell-Flemming model with perfect capital mobility and flexible exchange rates. d. the Mundell-Flemming model with perfect capital mobility and fixed exchange rates. e. none of the above.