In the basic Keynesian model, the major determinant of consumption expenditures is:
a. the interest rate.
b. inflation.
c. investment.
d. disposable income.
QUESTION 2Absolute advantage occurs when one nation can produce a good ____ its trading partners.
a. in larger quantities than
b. faster than
c. that is desired by
d. more efficiently than
e. only consumed by
QUESTION 3Voters may choose to remain uninformed about an issue because of:
a. the special-interest effect.
b. rational ignorance.
c. bureaucratic inefficiency.
d. the shortsightedness effect.
QUESTION 4The consumption function shows the relationship between:
a. planned consumption expenditures and disposable income.
b. permanent income and savings.
c. business inventory and real GDP.
d. aggregate demand and aggregate consumption.
QUESTION 5Who is recognized as the founder of public choice theory?
a. James Buchanan.
b. Steve Forbes.
c. Joseph Pechman.
d. Adam Smith.
QUESTION 6If India has an absolute advantage in rug production when compared to England, then:
a. India should export rugs to England.
b. England should export rugs to India.
c. international trade should not occur.
d. England uses fewer resources to produce rugs than India.
e. India uses fewer resources to produce rugs than England.
QUESTION 7If the economy is experiencing less than full-employment, the Keynesian school recommends that the government:
a. do nothing to stimulate the economy.
b. undertake fiscal policy to stimulate aggregate demand.
c. undertake fiscal policy to stimulate aggregate supply.
d. balance the budget to stimulate aggregate demand.
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