As a unit of account, money is used A) to hold purchasing power over time. B) to define prices of all other goods. C) to pay off future debts. D) to exchange for goods and services. ANSWER B
Assume that a house is rented by four students. When it comes to keeping the house clean, each of the four roommates has an incentive to leave cleaning to the others. As a result, the house is never clean. Which of the following is the best solution to this problem of free riding? A) Assign […]
In the above table, saving equals zero when real disposable income equals A) $500. B) $0. C) $200. D) $300. ANSWER A
The new growth theory of economic growth examines the interaction of A) regulations and capital expansion. B) technology, research, and innovation. C) resources and labor productivity. D) labor and population. ANSWER B
Singapore had a GDP per capita of $395 in 1960, and $52,918 in 2013. The U.S had a GDP per capita of $2,881 in 1960 and $52,839 in 2013. Such a growth is referred to as: A) instant growth. B) disguised growth. C) catch-up growth. D) sustained growth. ANSWER C
An increase in U.S. prices relative to Japanese prices will A) decrease both U.S. exports and imports. B) increase total planned spending on U.S. goods and services. C) increase U.S. imports and decrease U.S. exports. D) decrease U.S. imports and increase U.S. exports. ANSWER C
The real-balance effect indicates that at higher price levels A) the real value of money holdings increase, resulting in increased saving. B) the purchasing power of money will increase. C) the real value of money holdings fall, resulting in decreased spending. D) the value of the dollar will increase. ANSWER C
Refer to the above figure. If the relevant aggregate demand curve is AD1, then the economy is experiencing A) full employment. B) an inflationary ga ANSWER A
A fall in the price of flour, used in making cakes, is likely to: A) increase the supply of cakes. B) decrease the quantity supplied of cakes. C) increase the quantity supplied of cakes. D) decrease the supply of cakes. ANSWER A
Why did the classical economists think that large-scale unemployment was not possible in a market economy? What will be an ideal response? ANSWER The classical economists accepted Say’s law, which indicated that desired expenditures will equal actual expenditures. The act of producing indicates one wants to buy other goods. A surplus or shortage in […]