Consider a Closed Economy in the Long Run

question 35

Multiple Choice

Consider a closed economy in the long run. A country with a low national saving rate (as a fraction of real GDP) is likely to have

• A)trouble achieving potential real national income in the short run.
• B)an AS curve moving continually to the right.
• C)either a high or low growth rate depending on the investment schedule.
• D)a low growth rate because sustained high investment is not possible with low saving.
• E)a high growth rate because aggregate expenditure will be high out of any given income.

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Definitions:

Inverse Demand Curve

A representation of the demand for a good showing the maximum price consumers are willing to pay for a given quantity.

Perfect Price Discrimination

Perfect price discrimination occurs when a seller charges each buyer their maximum willingness to pay, extracting all consumer surplus.

Total Profits

The sum of earnings from a business operation, after all expenses have been deducted from total revenue.

Price-discriminating Monopolist

A monopolist that charges different prices to different consumers or groups of consumers for the same product, not based on cost differences.