When interest rates rise, A) borrowing costs decline, and total planned real expenditures decline. B) borrowing costs increase and total planned real expenditures increase. C) borrowing costs decline, and total planned real expenditures increase. D) borrowing costs increase, and total planned real expenditures decline. ANSWER D
A rise in the price level has a direct effect on spending because A) the real value of the money people have decreases and they can buy less with it. B) a higher price gives people more money, and so the more goods and services they can buy. C) the real value of the money […]
Money illusion is A) when people think they are better off when their income increases even though prices have increased by the same amount. B) when people are motivated by self-interest. C) could not exist if the economy did not have competitive markets. D) a basic condition that all classical economists assume people have. […]
________ is the study of an economy as a whole. A) Game theory B) Microeconomics C) Behavioral economics D) Macroeconomics ANSWER D
Investment includes spending on A) capital goods, buildings, and changes in business savings. B) capital goods, buildings, and changes in business inventories. C) capital goods, buildings, and consumer durable goods. D) capital goods, consumer durable goods, and changes in business inventories. ANSWER B
Which formula is correct? A) S = Yd – C B) Yd + S = C C) Yd + C = S D) Yd × S = C ANSWER A
When the government deliberately alters its level of spending and/or taxes in order to achieve specific national economic goals, it is exercising A) a laissez-faire policy. B) discretionary fiscal policy. C) monetary policy. D) a Ricardian policy. ANSWER B
Which of the following is an example of a topic studied by macroeconomists? A) Utility maximization by a consumer B) Decision making by a producer C) Aggregate demand in an economy D) Price determination by a firm ANSWER C
Your real disposable income is your real income after you have paid A) consumption expenses. B) rent and food expenses. C) net taxes. D) medical expenses. ANSWER C
Which of the following is an example of fiscal policy? A) a reduction in the money supply. B) a reduction in the federal funds rate. C) a reduction in lump-sum taxes. D) an increase in the physical stock of capital. ANSWER C
