How does a government budget deficit occur? A) A government’s tax revenues exceed its spending. B) If a nation carries a public debt, it must be running a deficit every year. C) A government’s spending exceeds its tax revenues. D) A nation earns more on exports than it spends on imports. ANSWER C
What does research tell us about the impact of Ricardian equivalence effects on the economy? A) Ricardian equivalence effects may exist, but their magnitudes are unclear. B) There is no evidence of any impact of Ricardian equivalence effects. C) Ricardian equivalence effects have a huge impact on aggregate demand. D) There is a very small […]
It is conceivable that the APC, APS, MPC, and MPS could simultaneously be A) APC = 1.0; APS = 0; MPC = 1.0; MPS = 0.15. B) APC = 1.0; APS = 0.1; MPC = 0.8; MPS = 0.25. C) APC = 1.3; APS = -0.3; MPC = 0.9; MPS = 0.1. D) APC = […]
The value of all the equipment and structures of an economy is referred to as: A) wealth. B) national income. C) asset value. D) capital stock. ANSWER D
Stocks change ________ whereas flows relate to ________. A) and that causes flows to change; changes that have no impact on stocks B) between points in time; changes within a given time period C) within a given period of time; changes between points in time D) only at the end of each year; amounts at […]
According to new growth theory, economic growth is driven by A) new ideas. B) the division of labor. C) positive externalities. D) higher birth rates. ANSWER A
The process by which the stock of equipment and structures available to an economy is increased by investment is referred to as: A) output expansion. B) autonomous growth. C) capital accumulation. D) investment growth. ANSWER C
Which of the following is NOT an example of a flow variable? A) inventory investment B) The federal deficit C) capital stock D) planned investment ANSWER C
Keynes argued that I. Capitalism did not always lead to full employment. II. Nominal prices were more important than relative prices. A) I only B) II only C) Both I and II D) Neither I nor II ANSWER A
Involuntary unemployment A) will increase as the wage rate falls. B) exists when there is an excess quantity of labor supplied. C) occurs when the wage rate is below the equilibrium wage rate. D) exists when there is a shortage of labor. ANSWER B