1) Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information you can conclude that A. the supply of clothing has grown faster than the demand for clothing [B. demand for clothing has grown faster than the supply of clothing] C. the supply of and demand for clothing have grown by the same proportion D. there is no way to determine what has happened to supply and demand with this information
2) Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity…show more content… can only be attained by expanding government consumption C. is aimed at achieving greater price stability [D. can motivate an expansion of real GDP]
22) Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should A. increase government expenditures by $100 billion [B. increase government expenditures by $50 billion] C. reduce taxes by $50 billion D. reduce taxes by $200 billion
23) GDP understates the value of output produced by an economy because it A. includes transactions that do not take place in organized markets, such as home cooked meals B. includes environmental degradation caused by increased output production [C. excludes value added from the underground economy, such as tips taken under the table] D. excludes the value of the wages and benefits of government employee
24) Other things equal, a decrease in the real interest rate will A. shift the investment demand curve to the right B. shift the investment demand curve to the left C. move the economy upward along its existing investment demand curve [D. move the economy downward along its existing investment demand curve]
25) Other things equal, a decrease in corporate income taxes will A. decrease the market price of real capital goods B. have no effect on the location of the investment demand curve [C. shift the investment
