Saving is a leakage from the circular flow. Why didn't the classical economists think saving might cause consumption expenditures to fall short of total output?
What will be an ideal response?
The classical economists believed that each dollar saved would be invested by firms so that the leakage of saving would be exactly matched by an injection of investment spending. The interest rate would adjust to ensure that saving equaled investment.
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Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the price of polo shirts decreases from $15 to $10
A) there will be a shortage of polo shirts. B) producer surplus will fall from $13 to $3. C) the marginal cost of producing the third polo shirt will increase to $25. D) consumers will buy no polo shirts.
A firm that faces a downward sloping demand curve is known as a
A) price taker. B) utility maximizer. C) price searcher. D) perfect competitor.