Consider the following simplified sequence of exchanges. A farmer sells wheat to a miller, for 25 cents. The miller grinds the wheat into flour, and sells that to a baker, for 35 cents
The baker turns the flour into a loaf of bread, which she sells to a grocer for 60 cents. The grocer then sells you the loaf of bread for 85 cents. What can we conclude? A) Your purchase of the bread avoided the use of a middleman.
B) The grocer's profit means you lost on the deal.
C) GDP increases by 25 cents.
D) GDP increases by 85 cents.
E) GDP increases by $2.05.
D
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In the real business cycle model, a persistent increase in total factor productivity
A) increases the real wage and increases the price level. B) increases the real wage and decreases the price level. C) decreases the real wage and increases the price level. D) decreases the real wage and decreases the price level.
Suppliers with a high supply elasticity will bear a ______ tax incidence, while suppliers with a low supply elasticity will bear a ______ tax incidence
A) lower; higher B) higher; lower C) lower or no; higher or full D) A and C