Transfer payments are excluded from government purchases in GDP accounting because
A) they are a reward to individuals who have been productive their entire lives.
B) they are difficult to measure.
C) nothing is being produced in return for the payment.
D) they are already included as part of investment.
C
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According to classical economists, the increase in unemployment in recessions is caused by
A) slack aggregate demand. B) the failure of wages to adjust to restore equilibrium in the labor market. C) the power of labor unions, which prevent firms from cutting wages. D) a mismatch of workers and jobs.
Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?
a. $0 b. $6 c. $10 d. $12