When Congestion Occurs on the Freeway (Because of a Shortage

question 63

Multiple Choice

When congestion occurs on the freeway (because of a shortage of freeway space) ,the economist would most likely explain this by saying that it is because

• A)the freeway has too few miles of roadway.
• B)there are too many cars.
• C)the price of driving on the freeway is below the equilibrium price.
• D)a and c

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Definitions:

Business Activity

Collective commercial, industrial, or professional operations within an economy, indicative of its overall economic health.

MPC

Marginal Propensity to Consume, a measure in economics that indicates the proportion of additional income that a household is likely to spend on consumption rather than saving.

Full Employment GDP

Refers to the maximum level of output that an economy can produce without causing inflation, when unemployment is at its natural rate.

Equilibrium GDP

Equilibrium GDP is the level of real GDP where aggregate demand equals aggregate supply, indicating a state of economic balance without excess demand or supply.