Suppose That There Is No Government and No International Trade

question 112

Multiple Choice

Suppose that there is no government and no international trade. When C + I is less than the level of real GDP

• A) unplanned inventories decrease, and real GDP expands.
• B) unplanned inventories increase, and real GDP contracts.
• C) unplanned inventories equal zero, and there is no change in the level of real GDP.
• D) real planned investment spending equals real planned saving.

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Definitions:

Economies of Scale

Economies of scale occur when increasing the production scale leads to a decrease in the long-term average costs, often due to more efficient use of inputs.

Exclusive Franchise

A legal agreement granting one party the sole right to sell or distribute a company's products or services in a particular market area.

Conglomerate Merger

involves the combination of firms that operate in unrelated business areas, aiming for diversification and reduced business risk.

Distinct Industries

Different sectors of the economy that produce different types of goods or services, characterized by unique products, markets, and production processes.