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Insurance companies can reduce risk by accepting premiums from
A) many people to insure against independent events.
B) few people to insure against independent events.
C) many people to insure against dependent events.
D) few people to insure against dependent events.
Firms expect to make money on repeat business because:
A) they think they can put one over on their customers.
B) all firms are monopolists.
C) firms have more power than customers.
D) the management of the firm expects both the firm and their customers to be made
better off by their exchange.
Who is associated with the following summary of the economic way of thinking: "The
theory of economics does not furnish a body of settled conclusions immediately
acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a
technique of thinking which helps its processer draw correct conclusions."
A) John Maynard Keynes
B) Alfred Marshall
C) Adam Smith
D) President Harry Truman
Recall the Application about the increase in political independence for the Bank of
England and its effect on anticipated inflation to answer the following question(s). In
1997, the Bank of England became more independent from the government. Although
the government still retained the authority to set overall policy goals, the Bank of
England was free to pursue its policy goals without direct political control. Federal
Reserve economist Mark Spiegel compared interest rates on two different types of
long-term bonds, those that are automatically adjusted for inflation and those that are
not, to see how the British bond market reacted to this policy change.According to this
Application, the difference in interest rates on bonds that are automatically adjusted for
inflation and bonds that are not adjusted primarily reflects
A) the prime rate of interest.
B) expectations of inflation.
C) the discount rate.
D) the velocity of money.
Say's Law states that:
A) demand always creates its own supply.
B) people are motivated by self-interest.
C) supply creates its own demand.
D) economic markets are unstable.
If GDP is ________ potential output, adjustment to the long-run equilibrium requires
that output rises and prices ________.
A) above; rise
B) above; fall
C) below; rise
D) below; fall
The production function described in the chapter assumes that:
A) the capital stock is fixed.
B) both capital and the labor stock is fixed.
C) the labor stock is fixed.
D) neither the capital and the labor stock is fixed.
Economists argue that central banks that are credible in their fight against inflation can
more easily:
A) lower inflation without creating extra unemployment.
B) increase the money supply.
C) buy bonds.
D) lead the economy into a depression.
When the economy is in a boom, the intersection between the:
A) short run AS and the AD occurs at an output level higher than potential output.
B) short run AS and the AD occurs at an output level lower than potential output.
C) long run AS and the AD occurs at an output level higher than potential output.
D) long run AS and the AD occurs at an output level lower than potential output.
If the number of banana producers increases:
A) the demand for bananas increases.
B) the demand for bananas decreases.
C) the supply of bananas increases.
D) the supply of bananas decreases.
