Keynesian theory is based on the hypothesis that A) full employment is automatically attained in any economy. B) saving is influenced primarily by the interest rate. C) saving and consumption are influenced primarily by real current disposable income. D) planned savings equal planned investment only at full employment. ANSWER C
If other factors are held constant, an increase in the price level A) causes desired net export spending to rise. B) causes the real value of the money to increase. C) causes desired net export spending to fall. D) induces people to spend their money faster. ANSWER C
Which of the following statements is true? A) Macroeconomics studies how individuals make choices. B) Microeconomics is the study of an economy as a whole. C) The study of the inflation rate is covered under microeconomics. D) The study of the unemployment rate is covered under macroeconomics. ANSWER D
Regarding the role of saving in economic growth, studies indicate that A) there is both a positive and a negative relationship between economic growth and saving. B) there is a positive relationship between economic growth and saving. C) there is a negative relationship between economic growth and saving. D) there is no relationship between economic […]
The interest rate effect that helps explain the slope of the aggregate demand curve arises because A) an increase in the price level lead to decreases in interest rates, which induces more borrowing and hence raises planned real expenditures. B) interest rates and total planned real expenditures are unrelated. C) an increase in the price […]
Which of the following is an example of a topic studied by microeconomists? A) Price determination by a firm B) Interest rate determination C) Measures to combat inflation D) National income calculations ANSWER A
Jacob buys less soda when the price of soda rises 10 percent, while the prices of all other goods also rise 10 percent. Jacob is A) behaving in accordance with classical economic theory. B) worrying too much about a coming recession. C) suffering from money illusion. D) paying too much attention to changes in relative […]
It is likely that a small increase in a country’s saving rate will have A) a large effect on per capita real GDP immediately because the increase in saving leads to a much larger rate of economic growth. B) a small effect on per capita real GDP many years later because the increase in saving […]
Joe’s increase in wages has been identical to the increase in the price level. Joe thinks that he is better off and has increased his expenditures. Joe’s behavior is consistent with A) the classical model. B) Say’s law. C) money illusion. D) a vertical aggregate supply curve. ANSWER C
By definition, disposable income is equal to A) consumption minus saving. B) consumption plus saving. C) consumption plus investment. D) investment plus saving. ANSWER B
