Why does the production possibilities frontier have a bowed out shape rather than being a straight line?
What will be an ideal response?
The fact that as the production of one good or service increases, its opportunity cost increases means that the production possibilities frontier will be bowed out. Only if the opportunity cost remained constant as the production of a good increases would the production possibilities frontier be a straight line.
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According to the monetarist view, the
a. IS schedule is quite flat; hence, reflecting a high interest elasticity of aggregate demand. b. IS schedule is quite steep; hence, reflecting a high interest elasticity of aggregate demand. c. LM schedule is quite flat; hence, reflecting a high interest elasticity of money demand. d. IS schedule is almost vertical; hence, reflecting a very low interest elasticity of money demand.
If savers require a 2% return and inflation is expected to be 3%, what approximate rate will banks offer savers?
A) 1% B) 3.2% C) 5% D) 6%