A useful economic model
a. deals only with possibilities that actually occurred.
b. makes only realistic assumptions.
c. may make some unrealistic assumptions in order to simplify a complex reality.
d. should avoid drawing conclusions that have public policy implications, since economics is not equipped to make value judgments.
c
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Minneapolis business Rogue Chocolatier sells specialty chocolate bars with a high cocoa content. Rogue can produce 15 chocolate bars per day with one employee, 29 with 2, 35 with 3 and 40 with 4 employees. Which statement is TRUE?
A) Rogue's marginal product curve decreases continually. B) Rogue's marginal product curve initially increases and then decreases. C) Rogue's total product curve increases at an increasing rate. D) Rogue's marginal product curve decreases initially and then increases.
Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?
A) Firms have to hire an extra worker to change prices in its store because of inflation. B) A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation. C) A bank collects a lower amount of interest from a loan because inflation was under-predicted. D) A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year.
Which of the following assets is the most liquid?
A) money market mutual fund B) computer C) washing machine D) U.S. Treasury bond
If the marginal propensity to consume is 0.8, what is the value of the expenditure multiplier?
a. 0.2 b. 0.8 c. 1.25 d. 5.0 e. 8.0