In the above figure, when real disposable income equals 600 A) there is dissaving. B) real disposable income exceeds consumption. C) consumption is less than disposable income. D) consumption equals real disposable income. ANSWER D
Holding nominal money balances constant, a decrease in the price level A) causes the real value of the money balances to increase, thereby increasing the interest rate. B) generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in total planned real expenditures. C) causes the real […]
Money is defined as A) a by product of a barter economy. B) any financial instrument that is backed by gold. C) anything people generally accept in exchange for goods and services. D) a person’s net worth. ANSWER C
Which of the following pairs of goods is likely to be considered substitutes? A) A Nokia cell phone and a Nokia cell phone charger B) Coffee and sugar C) Printers and printing ink D) A Ford car and public transportation ANSWER D
What is TRUE of the aggregate supply curve in the classical model? A) The aggregate supply curve is downward sloping. B) The aggregate supply curve is vertical. C) The aggregate supply curve is horizontal. D) The aggregate supply curve is not determined by the level of employment. ANSWER B
Without an accepted medium of exchange, people A) have to specialize in one area of production. B) have to resort to barter in order to exchange goods and services. C) have to rely on gold or silver in order to exchange goods and services. D) can efficiently obtain goods and services. ANSWER B
An indirect effect of an increase in the price level works through A) changes in trade balances as domestic goods become more expensive, causing interest rates to move in the opposite direction from the change in the exchange rate. B) interest rates as people save more as the higher prices make their money balances less […]
What is TRUE when the credit market is in equilibrium? A) The legal minimum wage equals the actual wage. B) Desired saving equals desired investment. C) Desired employment equals the number of jobs available. D) Desired consumption spending equals the total of saving plus investment. ANSWER B
In the above figure, when real disposable income is less than 600, then A) consumption is less than disposable income. B) consumption is the same as disposable income. C) consumption is more than disposable income. D) the MPC will fall. ANSWER C
The wealth effect is another term for the A) the interest rate effect. B) the real-balance effect. C) substitution effect. D) the indirect effect. ANSWER B