What situation gives rise to a surplus?
A. The current price of the good is above its market clearing price.
B. The current price of the good is below its market clearing price.
C. Supply of the good decreases, but the market price is not permitted to change.
D. The market clearing price of the good is too high.
Answer: A
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The high-school dropout rate typically declines during a recession because
A) more money flows into the public sector as the flow declines in the private sector. B) teachers become more readily available during a recession. C) the opportunity cost of continuing in school falls in a recession. D) the demand for education rises in a recession. E) the legal school-leaving age is a function of the unemployment rate.
Entrepreneurs obtain control over the resources employed in the projects they undertake by
A) acquiring ownership through investment of their own funds. B) borrowing funds with which to purchase the resources. C) floating new issues of stock or bonds. D) offering credible guarantees to owners of resources. E) reinvesting the profits from previous successful projects.
Friedman and Schwarz argue that money is not neutral because
A) theoretical models of the economy don't show monetary neutrality. B) money is a leading, procyclical variable. C) they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions, and output moved in the same direction as money. D) they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession.
Savings accounts pay very low rates of interest. The average return on the stock market is about 10-12%, in the long run. Why would anyone put money into a savings account?
What will be an ideal response?