Which of the following is true in the classical model?
a. A spontaneous increase in spending can cause an increase in output and employment.
b. An increase in output and employment can cause a decrease in spending.
c. A spontaneous decrease in spending can cause an increase in output and employment.
d. An increase in output and employment can cause an increase in spending.
e. A spontaneous decrease in spending can cause a decrease in output and an increase in
employment.
If a good is nonexcludable,
Improvements in the quality of consumer goods and services over time
a. cause inflation as measured by the CPI to overstate the actual inflation rate
b. cause inflation as measured by the CPI to understate the actual inflation rate
c. are accounted for in the CPI
d. are insignificant and thus would not affect the CPI even if accounted for
e. improve the accuracy and consistency of the market basket
Samantha has been working for a law firm and earning an annual salary of $90,000. She
decides to open her own practice. Her annual expenses will include $15,000 for office
rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a
$35,000 salary for a secretary/bookkeeper. Samantha will cover her start-up expenses
by cashing in a $20,000 certificate of deposit on which she was earning annual interest
of $1,000. Assuming that there are no additional expenses, Samantha’s annual explicit
costs will equal
On a graph, the private sector’s demand for loanable funds curve is
a. upward sloping
b. vertical
c. horizontal
d. downward sloping
e. horizontal then upward sloping
The term quantity demanded
The supply curve indicates
In the long run,
a. higher consumption spending means a larger capital stock and a higher standard of
living
b. higher investment spending means higher interest rates
c. higher investment spending means a larger capital stock and a higher standard of
living
d. higher interest rates means higher consumption spending
e. higher government spending means a larger capital stock and a higher standard of
living
In the long run, if an economy’s consumption spending is $5 trillion, its planned
investment is $2 trillion, government spending is $1 trillion, net tax revenue is $1
trillion, and household savings are $2 trillion, total output should be
a. $3 trillion
b. $5 trillion
c. $7 trillion
d. $8 trillion
e. $11 trillion
Government policies that help increase the skills of the workforce or that subsidize
employment more directly would
a. decrease employment and increase output
b. increase employment and decrease output
c. increase employment and increase output
d. increase unemployment and decrease output
e. increase unemployment and increase output
The reform of the welfare system passed by Congress and signed by President Clinton
changed the benefits for welfare recipients as it
a. decreased the number of people eligible for benefits, increased the benefit amount for
those still eligible, and set a maximum coverage period of five years
b. decreased the number of people eligible for benefits, cut the benefit amount for those
still eligible, and set a maximum coverage period of three years
c. increased the number of people eligible for benefits, cut the benefit amount for those
still eligible, and set a maximum coverage period of three years
d. decreased the number of people eligible for benefits, cut the benefit amount for those
still eligible, and set a maximum coverage period of five years
e. froze the number of people eligible for benefits, cut the benefit amount for those still
eligible, and set a maximum coverage period of three years
No society can provide its citizens with everything that they want because of
When individuals trade in open markets,
Economic growth in less-developed countries comes at the cost of
a. higher taxes
b. lower current consumption
c. lower taxes
d. lower government spending
e. lower future consumption
Financial intermediaries are important because
a. the process of finding loans is complicated
b. firms are usually unwilling to part with extra revenue
c. they are examples of banks
d. we could not function in society without them
e. they facilitate efficient transactions between borrowers and lenders