Question

Which of the following is true? a. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low b. A depression is a recession that is mild and relatively brief c. The stages of a business cycle are contraction, recession, expansion, boom d. GDP includes spending on recreation and travel, but it does not cover leisure time

Tonight, you and your friends are planning to see Captain America for which you have a $3 off coupon. Without the coupon, the ticket is $10. Once you are at the cinema, your friends now want to see Black Panther. Both movies start and end at the same time. Assume that you have nothing else to do. If you decide to see Black Panther with your friends, what is your opportunity cost?

a. the value of seeing Captain America + $3 b. $10 c. $3 d. the value of seeing Captain America + $10

Which of the following statements about GDP is not correct? a. Real GDP will increase when prices increase or output increases b. Nominal GDP equals real GDP in the base year c. Nominal GDP values production at current prices, whereas real GDP values production at constant prices d. The GDP deflator is the ratio of nominal GDP to real GDP multiplied by 100 Productive efficiency means that a. if all available resources are being used, it is possible to produce more products and services b. given the available inputs and technology, it is impossible to produce more of one good without decreasing the quantity that is produced of another good c. the particular mix of goods being produced represents the equal distribution of resources among different industries d. the particular mix of goods being produced represents the allocation that society most desires

Answer 1

Which of the following is true?

a. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low

b. A depression is a recession that is mild and relatively brief

c. The stages of a business cycle are contraction, recession, expansion, boom

d. GDP includes spending on recreation and travel, but it does not cover leisure time

Statement d) "GDP includes spending on recreation and travel, but it does not cover leisure time" is true. GDP includes all market transactions, but doesn't count the time spent on leisure. This is one of the challenges of estimating GDP, since many transactions are left unrecorded.

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Tonight, you and your friends are planning to see Captain America for which you have a $3 off coupon. Without the coupon, the ticket is $10. Once you are at the cinema, your friends now want to see Black Panther. Both movies start and end at the same time. Assume that you have nothing else to do. If you decide to see Black Panther with your friends, what is your opportunity cost?

a. the value of seeing Captain America + $3

b. $10

c. $3

d. the value of seeing Captain America + $10

Statement a) "the value of seeing Captain America + $3" is true. The opportunity cost involves the next best alternative, i.e., the value of seeing the other movie. Further, $3 could also have been saved in the other alternative, which should be counted as an opportunity lost. The $10 ticket is common for both options, hence not a loss.

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Which of the following statements about GDP is not correct?

a. Real GDP will increase when prices increase or output increases

b. Nominal GDP equals real GDP in the base year

c. Nominal GDP values production at current prices, whereas real GDP values production at constant prices

d. The GDP deflator is the ratio of nominal GDP to real GDP multiplied by 100

Statement a) "Real GDP will increase when prices increase or output increases" is false. Real GDP increases when output increases. Prices are kept constant in calculating real GDP. If prices are also increasing, it indicates that nominal GDP has increased.

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Productive efficiency means that

a. if all available resources are being used, it is possible to produce more products and services

b. given the available inputs and technology, it is impossible to produce more of one good without decreasing the quantity that is produced of another good

c. the particular mix of goods being produced represents the equal distribution of resources among different industries

d. the particular mix of goods being produced represents the allocation that society most desires

Statement b) "given the available inputs and technology, it is impossible to produce more of one good without decreasing the quantity that is produced of another good" is true. Productive efficiency means that the production process has maximized output, using the lowest costs. The optimal output has been arrived, and any further changes may reduce efficiency. The best combination of output of two goods has been arrived.