Money illusion is
A. when people think they are better off when their income increases even though prices have increased by the same amount.
B. could not exist if the economy did not have competitive markets.
C. when people are motivated by self-interest.
D. a basic condition that all classical economists assume people have.
Answer: A
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When the monetary base increases by $4 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals
A) 0.4. B) 2.5. C) 40.0. D) none of the above.
When firms leave a perfectly competitive market, then, other things remaining unchanged:
a. the market supply will decrease but the market price will rise. b. both the market supply and the market price will fall. c. both the market demand and the price will increase. d. the market demand will decrease but the market price will rise. e. both the market demand and the market supply will decrease.
A movement along the production possibilities curve would imply that:
A. productivity has increased. B. productivity has declined. C. society has chosen a different set of outputs. D. the labor force has grown.
U.S. firms collectively devote the largest portion of their total R&D spending to:
A. applied research (pursuing invention). B. basic scientific research. C. innovation and diffusion. D. financing startup firms.