Which of the following statements is true? A) Rational economic agents maximize more than just monetary income. B) It is not necessary to consider the risks of a particular alternative while making an optimal decision. C) An individual does not require information to make optimal decisions. D) The principle of optimization is only accurate when […]
The Law of Demand states that: A) the demand for a commodity is mostly influenced by consumers’ income. B) the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market. C) the quantity demanded of a commodity varies inversely with the price of the commodity. D) the demand for […]
Jenny likes chocolates. One day, a friend offers her a chocolate bar and she is extremely happy on receiving it. As the day progresses, many other people also buy her chocolate. As she gets more and more chocolates, her excitement on receiving each bar is seen to gradually lessen. Which economic principle is reflected in […]
According to the permanent income hypothesis, a person’s consumption increases only when A) the person’s average lifetime income increases. B) the person saves more. C) the person’s current income increases. D) the person’s income increases unexpectedly. ANSWER A
According to the above table, the marginal propensity to consume is A) 0.8. B) 0.75. C) 0.5. D) 0.6. ANSWER A
The total of all planned expenditures in the entire economy is A) aggregate supply. B) LRAS. C) aggregate demand. D) the open economy effect. ANSWER C
Which of the following correctly identifies the trade-off that a budget constraint represents? A) The amount of one good that has to be given up to purchase an additional unit of the other good B) The optimum combination of goods that a consumer with a given income should purchase C) The maximum amount of two […]
The discretionary change of government expenditures or taxes to achieve national economic goals is A) a direct expenditure upset. B) fiscal policy. C) Ricardian-equivalence theorem. D) supply-side economics. ANSWER B
Which of the following does free trade encourage? A) higher rates of economic growth B) more rapid spread of technology C) domestic industries’ access to larger markets D) all of the above ANSWER D
In the classical model, a change in aggregate demand A) causes changes in both the long-run real GDP and in the price level. B) causes a change in long-run real GDP but not in the price level. C) causes a change in the price level but not in the long-run real GDP. D) has no […]
