The economic systems of the former Soviet Union, the People's Republic of China, and Cuba are best classified as:
a. traditional economies. b. command economies.
c. market economies. d. decentralized economies.
QUESTION 2The impact of the multiplier effect is to:
a. smooth out the up and down swings of the business cycle.
b. promote price stability.
c. magnify small changes in spending into much larger changes in real GDP.
d. reduce the impact of an increase in investment on output and employment.
QUESTION 3Which of the following statements is false?
a. Round stones with holes in the center can serve as money.
b. Money eases the process of exchanging goods and services in a modern economy.
c. Money serves as a measure of value only when it is backed by gold or silver.
d. Money is used as a measure of the relative value of goods and services in an economy.
QUESTION 4Proponents of a command economy argue that it promotes:
a. efficiency. b. equity.
c. consumer sovereignty. d. economic growth.
QUESTION 5Which of the following explains why a 100 billion reduction in consumption spending might decrease equilibrium real GDP by more than 100 billion?
a. Say's law.
b. The quantity theory of money.
c. Flexible resource prices.
d. The multiplier principle.
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