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
Which of the following is TRUE? A) MPC + MPS = 1 B) MPC * MPS = 1 C) MPC – MPS = 1 D) MPC / MPS = 1 ANSWER A
Explain the relationship between economic growth and labor productivity. What will be an ideal response? ANSWER Economic growth equals the sum of the growth rates of all inputs plus the rate of growth in the productivity of the inputs. Hence, other things constant, an increase in labor productivity leads to an increase in economic […]
Which of the following correctly explains the role of the government in a free market? A) The government acts as a referee by enforcing contracts and preventing stealing. B) The government sets prices according to the relative value of each good. C) The government allocates goods to those buyers who value the goods the most. […]
Define economics. Who are economic agents? What will be an ideal response? ANSWER Economics is the study of how agents choose to allocate scarce resources and how these choices affect society. An economic agent is an individual or a group that makes choices.
