Why is the competitive equilibrium price often referred to as the market clearing price? What will be an ideal response? ANSWER The competitive equilibrium price is determined at the point of intersection of the market demand and the market supply curve. At the point of intersection, the quantity demanded is equal to the quantity […]
To encourage economic development a country should do all of the following EXCEPT A) establish a system of property rights. B) allow creative destruction to run its course. C) limit the amount of imports allowed into the country. D) invest in human capital. ANSWER C
Which of the following factors will NOT increase economic development? A) establishing a system of property rights B) increasing the amount of protectionism C) increasing the amount of education in the population D) creative destruction where old jobs, companies and industries are destroyed ANSWER B
The Keynesian short-run aggregate supply curve A) reflects the fact that real GDP is supply-determined. B) reflects the fact that real GDP does not vary with changes in aggregate demand. C) is vertical. D) is horizontal. ANSWER D
How is economic growth graphically depicted? A) The long-run aggregate supply curve shifts right. B) Aggregate demand shifts to the right. C) Short-run aggregate supply shifts left. D) The aggregate demand curve shifts to the left. ANSWER A
A highly liquid asset A) generally has a very limited market for its resale. B) has high transaction costs associated with its sale. C) must be held for a substantial period of time. D) can be disposed of easily without loss of value. ANSWER D
What are the two important properties of all models? What will be an ideal response? ANSWER a) All models are approximations: Models cannot predict how a certain change in a particular variable will affect all individuals in the population. Instead, it predicts what will happen to most people in most circumstances. Thus, any model […]
What is meant by the term “scientific method”? What are the key components of the scientific method? What will be an ideal response? ANSWER The scientific method is the name for the ongoing process that economists, social scientists, and natural scientists use to develop models of the world and test those models with data. […]
If an asset can be obtained or disposed of without much risk of losing its nominal value, it is said to be A) valuable. B) wealth. C) fiduciary. D) liquid. ANSWER D
Marginal propensity to consume A) is the amount of consumption that is independent of the level of disposable income. B) is the same as the break-even point. C) is the proportion of total disposable income that is consumed. D) gives the amount a person changes planned consumption for a change in real disposable income. […]
