Suppose the market for cement is such that the government does not interfere in price determination but plays an important role in the provision of property rights. While there are a large number of buyers and sellers, everyone conducts transactions at a common market price. Which of the following statements is true about the structure […]
Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will: A) increase his sales. B) lose only a few buyers. C) increase his profit. D) lose almost all of his buyers. ANSWER D
The consumption function shows the relationship A) between households’ disposable income and their consumption spending. B) between consumption spending and capital gains. C) between government spending and tax collection. D) between investment and rate of return. ANSWER A
Which of the following is a discretionary fiscal policy action? A) a progressive tax system that leads to an increase in income tax revenues during an economic boom B) a deliberate tax cut when the economy experiences high unemployment C) an increase in the amount of unemployment compensation because more people become unemployed D) an […]
Which of the following are mentioned as forces of the new growth theory that influence economic growth? I. Technology II. Research III. Innovations A) II and III only B) I only C) I, II, and III D) I and II only E) I and III only ANSWER C
A seller who is a price taker charges: A) above the market price. B) different prices to different buyers. C) the market price. D) below the market price. ANSWER C
Along a linear consumption function, A) the average propensity to consume rises with income, but the marginal propensity to consume falls with an increase in income. B) the marginal propensity to consume rises with an increase in income. C) the average propensity to consume falls with an increase in income. D) both the average propensity […]
Typical goals for fiscal policy are A) running high deficits and raising consumer prices. B) high prices for consumers and low prices for businesses. C) high employment and price stability. D) increasing the money supply so the government can spend more. ANSWER C
New growth theory supports the idea that I. economic growth can continue as long as we keep finding new ideas. II. increases in human capital can lead to greater rates of economic growth. A) I only B) II only C) Both I and II D) Neither I nor II ANSWER C
Define free markets. Does a perfectly competitive market qualify as a free market? What will be an ideal response? ANSWER A free market can be defined as a market structure where all exchanges are voluntary. There is very little government control or coercion in the market and the government does not tell market participants […]
