Which of the following statements is true of the economy in the long run?
1. real GDP eventually moves to potential because all wages and prices are assumed to be flexible.
2. the economy can achieve its natural level of employment and potential output at any price level.
3. there is no cyclical unemployment.
A. I only
B. I and II only
C. I and III only
D. I, II, and III
Ans: D. I, II, and III
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The structural deficit is the deficit
A) during an expansion. B) that would occur at full employment. C) caused by the business cycle. D) during a recession. E) that does not increase the national debt.
Suppose a factory can be designed to produce either trucks or cars. The figure above shows the marginal cost and marginal benefit of producing trucks in terms of the forgone cars
a. What is the marginal benefit of the 25th truck? b. What is the marginal cost of the 25th truck? c. Should the 25th truck be produced? Why or why not. d. What is the marginal benefit of the 75th truck? e. What is the marginal cost of the 75th truck? f. Should the 75th truck be produced? Why or why not? g. What is the allocatively efficient quantity of trucks?