The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:
A. derived demand.
B. consumer sovereignty.
C. the invisible hand.
D. market failure.
Answer: B
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Refer to Table 2-5. Assume Nadia's Neckware only produces ascots and bowties. A combination of 16 ascots and 6 bowties would appear
A) along Nadia's production possibilities frontier. B) inside Nadia's production possibilities frontier. C) outside Nadia's production possibilities frontier. D) at the horizontal intercept of Nadia's production possibilities frontier.
Which of the following explains the downward slope of the aggregate demand curve?
a. disposable income remains unchanged when prices rise. b. higher domestic prices encourage exports and discourage imports. c. higher prices reduce the household’s real wealth. d. All of these.
Which of the following is not true of a recession?
a. The economy is overheated. b. Cyclical unemployment is high. c. Unemployment is caused by insufficient spending. d. If the economy is in equilibrium, the aggregate expenditure line is too low to create an intersection at the full-employment level. e. If employers hired more workers to reduce unemployment, they would be unable to sell all the extra output those workers would produce.
If the public decides to hold more currency and fewer deposits in banks, bank reserves
a. decrease and the money supply eventually decreases. b. decrease but the money supply does not change. c. increase and the money supply eventually increases. d. increase but the money supply does not change.