Which of the following statements is true? A) An optimizing individual is also likely to exhibit rationality. B) Optimization requires individuals to foresee the future perfectly. C) The less information that is available, the easier it is to make optimal decisions. D) An optimizing individual need not consider the risks involved in various choices. […]
Suppose real disposable income increases by $1,000. Given this information, we know that A) consumption will generally increase by more than $1,000. B) saving will generally increase by exactly $1,000. C) consumption will generally increase by exactly $1,000. D) consumption will generally increase by less than $1,000. ANSWER D
The Law of Diminishing Marginal Benefit states that: A) the demand for a commodity declines as its price increases. B) the demand for a commodity is more dependent on income than on price. C) the willingness to pay for an additional unit declines as more of a good is consumed. D) lower levels of consumption […]
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 […]
