Why is there NO persistent unemployment in the classical model? A) Unionization creates job security for workers. B) The wage level adjusts to eliminate unemployment. C) The interest rate adjusts to eliminate unemployment. D) The rate of economic growth is always high enough to allow those who want to work at current wages to find […]
Suppose that along the aggregate demand curve, real GDP equals $14.2 trillion when the GDP deflator is 90. If the GDP deflator were 95, real GDP along the aggregate demand curve would equal A) more than $14.2 trillion but less than $14.8 trillion. B) less than $14.2 trillion. C) $14.2 trillion. D) more than $14.8 […]
Other things being equal, along an aggregate demand curve, a higher price level is associated with A) a lower nominal GDP. B) a higher real GDP. C) higher income levels. D) a lower real GDP. ANSWER D
If the economy is operating on the long-run aggregate supply curve, then expansionary fiscal policy will A) generate higher prices in the short run, but will induce aggregate supply to increase in the long run. B) generate an increase in real GDP and higher prices in the short run, but then real GDP will decrease […]
Which of the following is NOT an assumption of the classical system? A) Wages and prices are inflexible. B) Pure competition exists. C) There is no money illusion. D) People are motivated by self interest. ANSWER A
The break-even point on the consumption function represents the point where A) consumption is zero. B) income equals consumption plus spending. C) consumption equals spending. D) consumption equals income. ANSWER D
The market demand is the ________ of the individual demand of all the potential buyers. A) square of the sum B) sum C) product D) square root of the sum ANSWER B
An example of fiscal policy is A) a reduction in government spending. B) an increase in autonomous spending by consumers. C) a reduction in investment spending by the private sector. D) an increase in Social Security spending by the elderly. ANSWER A
Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David’s consumption of wine is: A) 4 bottles. B) 9 bottles. C) 7 bottles. D) 12 bottles. ANSWER C
A budget constraint represents the: A) inequality in the incomes earned by various economic agents. B) aggregate income earned by all the firms in an economy. C) total money income that an agent earns in different time periods. D) goods and services an economic agent can choose given her limited income. ANSWER D
