The Keynesian model is based on the idea that A) both consumption and saving are directly related to disposable income. B) saving depends only on the interest rate. C) consumption is unrelated to the level of real Gross Domestic Product (GDP). D) both consumption and saving are unrelated to the level of real Gross Domestic […]
A free market is a market: A) that has price controls imposed by a ruling authority. B) where almost all exchanges take place involuntarily. C) where determination of equilibrium quantity is free from the forces of demand and supply. D) that operates with little or no government control. ANSWER D
A price level increase tends to reduce net exports, thereby reducing the amount of real goods and services purchased in the United States. Economists refer to this phenomenon as A) the barrier effect. B) the Gross Domestic Product (GDP) effect. C) the open-economy effect. D) the wealth effect. ANSWER C
The relationship between a firm’s advertising expenditure and its profit is studied under: A) international economics. B) microeconomics. C) public economics. D) macroeconomics. ANSWER B
In order for a nation to be able to consume more in the future, it needs to A) produce less today in aggregate and save the difference between consumption and income. B) produce more today in aggregate and save the difference between consumption and production. C) consume more today in aggregate and borrow the difference […]
If the price level increases, A) the buying power of your checking accounts rises with it. B) the economy tends to grow faster. C) there is no effect on buying power. D) the buying power of your checking account falls. ANSWER D
The consumption function shows A) a positive relationship between an individual’s stock of wealth and his level of planned consumption. B) a negative relationship between planned consumption and aggregate saving. C) a positive relationship between disposable income and planned consumption. D) a negative relationship between disposable income and planned consumption. ANSWER C
When television commentators refer to “tax and spend” policy, they are referring to A) monetary policy. B) the Federal Reserve policy. C) automatic stabilizers. D) fiscal policy. ANSWER D
Which of the following statements correctly describes a perfectly competitive market? A) In a perfectly competitive market, individual sellers and buyers can influence the market price. B) All participants in a perfectly competitive market are price takers. C) Haggling and bargaining is commonly observed in a perfectly competitive market. D) Buyers in a perfectly competitive […]
Saving is not a problem in the classical model because A) savers and investors are the same people. B) interest rates are flexible, and savings were channeled into investment. C) the classical economists assume that saving was beneficial to people for retirement. D) saving would be spent by consumers eventually. ANSWER B
