Most economists would agree with which statement about fiscal policy?
A. It's useful when few resources are unemployed due to an aggregate demand shock.
B. It's useful when a lot of resources are unemployed due to a real shock.
C. It's useful when few resources are unemployed due to a real shock.
D. It's useful when a lot of resources are unemployed due to an aggregate demand shock.
Answer: D. It's useful when a lot of resources are unemployed due to an aggregate demand shock.
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The substitution effect measures how
a. the quantity demanded of one good is influenced by a change in income, with prices constant b. the quantity demanded of one good is influenced by a change the price of another good c. marginal utility per dollar spent is affected by income changes d. an increase in the price of a good is effectively the same as a reduction in income e. the quantity demanded of one good is influenced by a change in the price of that good, with income constant
When we see a firm make a long-run decision to exit the industry, it is likely that
a. profits are positive but unattractive to the owner b. market prices only covered average total, but not average variable costs c. all loans have been paid back early d. market prices will stay below marginal costs at all levels of production where average total costs are falling e. the cost of fixed factors of production have increased dramatically