For an economy starting at full employment real GDP, a decrease in investment results in a(n)
A. decrease in full-employment output.
B. inflationary output gap.
C. recessionary output gap.
D. increase in full-employment output.
Answer: C
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In the circular flow model, which of the following items is a real flow?
A. The flow of government expenditures to firms for the goods bought B. The flow of income from firms to households for the services of the factors of production hired C. The flow of U.S. borrowing from the rest of the world D. The flow of labor services from households to firms
If a firm is operating in the range of diseconomies of scale, and if it is currently at the minimum point of its short-run average total cost curve, explain what action it can take to reduce its costs, if it does not want to change the quantity of output that it is producing