Gemma and Emily expect investments A and B to yield an annual return of 15 percent and 10 percent respectively. While Gemma invests in A, Emily invests in B. This implies that Gemma has a higher risk tolerance than Emily

Which of the following statements is true?

A) Models help economists to explain the past, but do not help in predicting the future. B) The scientific method used by economists is based on idealism and not empiricism. C) Testing with data enables economists to distinguish between good models and bad models. D) Models that economists use are perfect replicas of reality.

A recessionary gap occurs when

A) aggregate demand falls, but other things remain constant. B) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve. C) the short-run equilibrium level of real GDP is greater than the level consistent with the long-run aggregate supply curve. D) short-run aggregate supply falls, but other things remain constant.