How is a budget line similar to a production possibilities frontier? How do they differ?
What will be an ideal response?
Both the budget line and the production possibilities frontier illustrate limits. The budget line describes the limits to consumption possibilities; the production possibilities frontier describes the limits to production possibilities. A consumer is unable to consume combinations of goods that lie beyond his or her budget line. Similarly, a nation is unable to produce combinations of goods that lie beyond its production possibilities frontier.
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You grow poplar trees. The lumber yard purchases cut trees from you. The trees grow 1 foot per year. Assuming a constant real price per foot for poplar and a real interest rate of 3%, would you sell a 20-foot tree today?
What will be an ideal response?
The classical view of the quantity theory of money assumes that the velocity of money
a. is constant b. will rise if the money supply rises and fall if the money supply falls c. will rise if the money supply rises, but it will not change if the money supply falls d. will fall if the money supply rises, and it will rise if the money supply falls e. will fall if the money supply rises, but it will not change if the money supply falls