Patents stimulate technological advance by A) allowing inventors to capture the economic rewards of their inventions. B) making capital more productive. C) providing information about the status of technical knowledge in the economy. D) enabling the government to determine which potential technological advances firms should pursue. ANSWER A
Which of the following pairs of goods is likely to be considered complements? A) Nokia and Samsung cell phones B) Laptops and electric heaters C) Motorcycles and typewriters D) Pens and writing pads ANSWER D
According to the classical model, investment A) is a function of the nominal GDP. B) is inversely related to the interest rate. C) is a function of real GDP. D) is influenced by the money illusion at low income levels. ANSWER B
The interest rate effect is part of the reason A) the long-run aggregate supply curve is vertical. B) the aggregate demand curve is downward sloping. C) the short-run aggregate supply curve is upward sloping. D) the aggregate demand curve is upward sloping. ANSWER B
A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as A) the interest rate effect. B) demand side inflation. C) the real-balance effect. D) the open economy effect. ANSWER D
In the classical model, what is the result of an increase in aggregate demand? A) The price level increases, and real GDP remains constant. B) The price level decreases, and real GDP remains constant. C) Real GDP increases, and the price level remains constant. D) Real GDP decreases, and the price level remains constant. […]
In the short run, expansionary fiscal policy usually will A) decrease the price level and decrease real GDP. B) increase the price level and increase real GDP. C) decrease the price level and increase real GDP. D) increase the price level and decrease real GDP. ANSWER B
Contractionary fiscal policy will most likely A) involve increasing government spending. B) reduce the price level. C) involve cutting taxes. D) raise real GDP. ANSWER B
Which of the following factors is likely to lead to an increase in the quantity demanded of pens? A) A fall in the price of paper B) A fall in the incomes of all consumers C) A rise in the incomes of all consumers D) A fall in the price of pens ANSWER D
Refer to the above figure. Line EBD is called A) the saving function. B) the consumption function. C) the 45-degree line. D) aggregate demand. ANSWER C
