Which of the following statements is false? In the circular flow model: A) the funds needed to finance investment spending come from the saving of households. B) GDP can be measured either by the income received or by the expenditures made. C) factor payments are made to business firms. D) consumption expenditures are made by […]
If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur? A) Quantity demanded will fall by a relatively large amount. B) Quantity demanded will fall by a relatively small amount. C) Quantity demanded will rise in the short run, but fall in the long run. D) Quantity demanded […]
An industry characterized by a small number of dominant firms that face downward-sloping demand curves is best described as: A) a monopoly. B) monopolistically competitive. C) an oligopoly. D) perfectly competitive. ANSWER C
Within the circular flow model, which of the following is not represented as a flow of funds into firms? A) Foreign purchases of goods and services. B) Income payments. C) Consumption spending. D) Government purchases. ANSWER B
Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively: A) large decrease in quantity demanded. B) large decrease in demand. C) small decrease in quantity demanded. D) small decrease in demand. ANSWER A
The major categories of expenditures in the economy are: A) consumption, gross investment, and government purchases. B) consumption, net investment, and net exports. C) consumption, fixed investment, government purchases, and net imports. D) consumption, gross investment, government purchases, and net exports. ANSWER D
The fact that the firms in an oligopoly are mutually interdependent means that each firm: A) must consider the reactions of its competitors when it sets the price for its output. B) produces a product that is similar, but not identical, to the products of its competitors. C) produces a product that is identical to […]
Which of the following is not included in gross private domestic investment spending? A) Household spending on residential construction. B) Spending on business inventories. C) Household spending on durable goods. D) Business spending on plant and equipment. ANSWER C
Which of the following would not be classified as an oligopolistic industry? A) Defense contractors. B) The recorded music industry. C) The tobacco industry. D) The women’s clothing industry. ANSWER D
Assume that with existing tax and spending laws, government spending exceeds government tax revenues. To cover the resulting shortfall, the government must: A) increase consumers’ incomes. B) print more money. C) Borrow money in the financial markets. D) lower interest rates. ANSWER C
