Exhibit 2-7 Production Possibilities Curve for the Economy Shown

question 115

Multiple Choice

Exhibit 2-7 Production possibilities curve For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point A?

• A)More cars are being produced than are needed.
• B)There must be resources that are not being used fully.
• C)Some car production must be forgone in order to produce more grain in the same period.
• D)Increased grain production would be impossible.

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Definitions:

Keynesian View

An economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.

Supply-Side View

An economic perspective emphasizing the importance of increasing production and supply as a key to economic growth, price stability, and employment.

Balanced Budget

A budget where revenues equal expenditures, resulting in no deficit or surplus.

New Classical View

An economic theory that emphasizes the importance of supply-side factors, rational expectations, and market-clearing prices.