-Suppose Puerto Rico and Hawaii Currently Have the Same Production

question 5

Multiple Choice

-Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the above figure is the PPF for hotels and consumption goods in the two areas.Hotels are a capital good that,once built,will help produce still more consumption goods..According to the figure,which island will have more rapid economic growth?

• A) Hawaii
• B) Both Hawaii and Puerto Rico will grow at the same speed.
• C) Puerto Rico
• D) Neither Hawaii nor Puerto Rico will grow.
• E) More than one of the above answers is correct.

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Definitions:

Aggregate Demand

The aggregate need for every good and service within an economy, measured at a certain fixed price level during a specific time frame.

Aggregate Supply

Aggregate supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period, under a given price level.

Aggregate Production

The total amount of goods and services produced within an economy at a given overall price level in a given period.

Aggregate Purchases

The total amount spent by consumers, businesses, and the government on goods and services within a particular period.