In the classical model, a shift to the right in aggregate demand would result in
A) a permanent increase in unemployment.
B) a permanent increase in real incomes.
C) an increase in the price level.
D) a permanent shift past full employment.
Ques. 2The above figure is referred to as a(n)
A) trade-off curve.
B) opportunity curve.
C) production possibilities curve.
D) scarcity-shortage curve.
Ques. 3Costs associated with economic growth include all of the following EXCEPT
A) environmental pollution.
B) psychological problems such as depression.
C) urban congestion.
D) improved health care.
Ques. 4Of the following, which is the least likely to be an example of substitute goods?
A) beer and pretzels
B) margarine and butter
C) beef and chicken
D) tea and coffee
Ques. 5Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for 80,000. If you sold the house today you would get 140,000. Your tax liability would be
A) 39,200.
B) 16,800.
C) indeterminate without knowing the inflation rate.
D) indeterminate without knowing the personal income tax rate.
Ques. 6Which is NOT true about the use of economic models?
A) Economic models are simplified representations of the real world.
B) Economists always use experiments in science laboratories to test their theories.
C) Economists use what has already happened in the real world to test their theories.
D) Economists are employed to explain economic phenomena but are never used to predict what might happen next.
Ques. 7Refer to the above figures. A positive externality exists that has not been corrected. Price and quantity will be
A) P1 and Q1.
B) P2 and Q2.
C) P3 and Q3.
D) P4 and Q4.
Ques. 8If supply decreases and demand increases
A) the market clearing price definitely rises, and the equilibrium quantity falls.
B) the market clearing price definitely rises, and the equilibrium quantity is indeterminate.
C) the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate.
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.
Ques. 9If the public debt increased by the same amount each year during the past three years, then
A) the U.S. government must have operated with the same budget surpluses during the past three years.
B) the U.S. government must have experienced budget surpluses that increased by the same amount each of the past three years.
C) the U.S. Treasury must have issued securities to fund a flow of government spending that exceeded a flow of tax revenues by the same amount during each of the past three years.
D) during each of the past three years, the U.S. Treasury must have bought back the same amount of securities that had previously been issued to cover deficits experienced more than three years ago.
Ques. 10There are a number of benefits that usually accompany economic growth. The following are such benefits EXCEPT
A) increase in literacy.
B) increased expected life-spans.
C) political stability.
D) urban congestion.
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