Which of the following is an example of a public good?
a. telephone service
b. national defense
c. a city-owned bus
d. electricity generated by a city-owned public utility
Question 2A conclusion of the theory of rational expectations is that, in the short run, the impact of a correctly anticipated fiscal policy designed to decrease AD will:
a. result in no net change in AD once people's expectations adjustments have been accounted for.
b. shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
c. decrease the price level.
d. result in no change in the price level.
Question 3International trade constantly increased throughout the twentieth century.
a. True
b. False
Indicate whether the statement is true or false
Question 4Which of the following is a valid reason for the government rather than the market to finance the provision of certain economic goods and services?
a. When the government provides economic goods, they are free; costs are incurred when such goods are provided by private firms.
b. Voters tend to be better informed than market consumers are.
c. Decision makers in the market sector are motivated by self-interest, whereas political decision makers are primarily motivated by altruism (the desire to help others).
d. Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers; the government can use taxes to overcome this problem of nonpayment.
Question 5A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
a. result in no net change in AD once people's expectations adjustments have been accounted for.
b. shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
c. be anticipated and compensated for, causing no significant effect on real GDP or employment if people's anticipations are correct.
d. have to be anticipated to change real output in the intended direction.
Question 6Globalization benefits all the participating nations equally.
a. True
b. False
Indicate whether the statement is true or false
Question 7If consumers were able to receive the full social benefits associated with the consumption of goods involving positive externalities, other things being equal, there would probably be:
a. an increase in consumption.
b. a decrease in consumption.
c. a greater misallocation of resources.
d. a decrease in the market price of the product.
Question 8A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
a. result in no net change in AD once people's expectations adjustments have been accounted for.
b. shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
c. be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment.
d. have to be a surprise to change real output in the intended direction.
Question 9Globalization is an economic issue and does not involve political and social dimensions.
a. True
b. False
Indicate whether the statement is true or false
Question 10If firms were required to pay the full social costs of the production of goods, including both private and external costs, other things being equal, there would probably be:
a. an increase in production.
b. a decrease in production.
c. a greater misallocation of resources.
d. a decrease in the market price of the product.
Question 11Critics of rational expectation theory believe:
a. most people are truly not very informed about the effects of a policy change.
b. most people do not adjust their behavior very rapidly to changes in government policies, in part because they are not informed about the effects of policy changes.
c. that wages and prices are not as flexible as the rational expectation theory assumes.
d. all of the above.
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