Keynes and his followers believed that A) the economy could not operate at any level of real Gross Domestic Product (GDP) less than full capacity. B) capitalism was one economic system that guaranteed full employment. C) wages and prices in the short run were flexible. D) there was no guarantee that a capitalist economy would […]
If the dollar appreciates and foreign goods become less expensive, the total planned expenditures on domestic goods and services will A) increase due to the open economy effect. B) fall due to the interest rate effect. C) fall due to the open economy effect. D) increase due to the interest rate effect. ANSWER C
Which of the following would be expected to shift the consumption function up? A) decreases in wealth B) increases in the nation’s population C) expectations of harder times ahead D) changes in real disposable income ANSWER B
In a perfectly competitive market, situations of surplus or shortage of a good: A) exist till the government or any ruling authority intervenes. B) are permanent phenomena. C) can exist simultaneously. D) are self-corrected due to the competitive nature of the market. ANSWER D
Refer to the scenario above. What is the national income of the economy? A) $7,000 B) $10,000 C) $2,000 D) $5,000 ANSWER A
By definition, a direct expenditure offset will occur whenever A) the interest rate falls. B) the interest rate rises. C) the government increases spending in an area that competes with the private sector. D) the government increases spending for the military. ANSWER C
Credit is: A) the loan that a debtor receives. B) the income that an employee earns. C) any good that cannot be consumed but is used for the production of other goods. D) any good that is available for free. ANSWER A
All of the following will shift the consumption function EXCEPT A) a change in income. B) a change in wealth. C) a change in the rate of interest. D) a change in expectations concerning economic conditions. ANSWER A
At a price of $1 per table, the quantity supplied of tables is 100 units whereas the quantity demanded is 70 units. Given this information, which of the following statements is true? A) $1 per table is the market clearing price. B) At $1 per table, there is a surplus in the market. C) At […]
The scientific method refers to the process by which economists and other scientists: A) plot graphs to illustrate relationships between different economic variables. B) develop models of the world and test those models with data. C) develop models to explain the past but not to predict the future. D) collect data for further use in […]
