Economists believe that individuals act as if they are motivated:
a. primarily by the opinions of their peers.
b. primarily by human emotions.
c. primarily by self-interest.
d. only by concern for the larger community.
Question 2A lower domestic price level tends to:
a. reduce aggregate expenditures and lower the aggregate quantity of goods and services supplied.
b. reduce aggregate expenditures and lower aggregate demand.
c. reduce aggregate expenditures and raise aggregate demand.
d. increase aggregate expenditures and raise the aggregate quantity of goods and services demanded.
e. increase aggregate expenditure on foreign goods and lower net exports.
Question 3When making decisions, economists believe that individuals act rationally if they:
a. seek to improve their own situations and not try to anticipate future consequences of their actions.
b. only pursue the goals of the community.
c. people do the best they can, based on their values and information, under current and future circumstances.
d. always choose alternatives that offer the greatest financial reward.
Question 4Identify the correct statement.
a. As domestic income rises, imports rise and net exports fall.
b. As foreign income rises, net exports fall.
c. As domestic income falls, imports rise and net exports fall.
d. As domestic income rises, imports fall and net exports rise.
e. As foreign income falls, net exports rise.
Question 5From an economists' perspective, which of the following observations is not true?
a. Self-interest is purely monetary in nature.
b. Self-interest can include benevolence.
c. Self-interest is a good predictor of human behavior in most situations.
d. Self-interest is not the same as selfishness.
Question 6If the exchange rate is defined as the price of the foreign currency in terms of the domestic currency, an increase in the exchange rate:
a. increases domestic demand for foreign goods.
b. makes domestic goods cheaper in the foreign markets.
c. lowers net exports.
d. lowers aggregate expenditure on domestic goods.
e. increases the domestic country's external debt burden.
Question 7Economists believe that most individuals act as if they are motivated by self-interest and:
a. respond selfishly.
b. respond in predictable ways to changing circumstances.
c. it leads to inconsistent and unpredictable behavior.
d. all of the above.
Question 8Which of the following will cause net exports to rise?
a. A depreciation of the domestic currency
b. A fall in foreign income
c. Higher foreign tariffs on domestic goods
d. Inflation in domestic economy
e. A depreciation of the foreign currency
Question 9Most of economic analysis assumes that most people act as if they are:
a. motivated by submerged emotional needs.
b. driven by magnetic forces generated by planetary movements.
c. motivated primarily by concern for the well-being of others.
d. motivated by self-interest.
Question 10Other things equal, a decrease in government spending:
a. increases the slope of the aggregate demand curve.
b. increases the domestic interest rate.
c. decreases aggregate expenditures.
d. shifts the aggregate demand curve to the right.
e. increases the equilibrium level of GDP.
Question 11When economists assume that people act rationally, it means they:
a. make decisions based on complete and accurate information.
b. make decisions that will not be regretted later on.
c. make decisions based on what they believe is best for themselves using available information.
d. make decisions based solely on what is best for society.
Question 12Identify the correct statement.
a. Investment is positively related to the interest rate.
b. Investment spending in an economy is stimulated by new production technology.
c. Investment is positively related to excess capacity.
d. Investment spending is positively related to the cost of capital goods.
e. Investment is negatively related to the rate of government spending.