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 […]
The transformation of an invention into something that benefits the economy is known as A) a compounder. B) an externality. C) an innovation. D) a patent. ANSWER C
An economy in long-run equilibrium experiences an increase in aggregate demand. According to the classical model, A) the price level will increase, but real GDP will not change. B) the price level and real GDP will increase at the same time. C) the price level will increase, but real GDP will decrease. D) the price […]
The consumption function shows how much A) households plan to consume per year at each possible interest rate. B) real disposable income people will earn at each income tax bracket. C) households plan to consume per year at each level of real disposable income. D) households plan to consume per year at each level of […]
When the government grants an inventor a patent A) he has the exclusive right to make, sell or use his invention for 5 years. B) the protection of a current invention would increase spending on R&D. C) the patent holder has less incentive to invest in R&D because one successful invention removes the need to […]
Keynes believed that the way to prevent recessions and depressions was to A) increase aggregate demand through expansionary fiscal policy. B) maximize the crowding out effect. C) only change tax rates as a means of regulating the economy. D) reduce spending when there is a recessionary ga ANSWER A
According to Keynes A) consumption is directly related to income but saving has no relationship with income. B) consumption is directly related to income but saving is inversely related to income. C) both consumption and saving are positively related to real disposable income. D) consumption is positively related to the interest rate. ANSWER C
When consumption spending is greater than disposable income, we know with certainty that we have A) dissaving. B) negative net investment. C) excess thrift. D) positive savings. ANSWER A