In the base year, real GDP ________ nominal GDP.
A. is equal to
B. could be greater than or less than
C. is less than
D. is greater than
Answer: A
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The amount by which consumption increases when disposable income increases by $1 is called:
A. the consumption function. B. autonomous expenditure. C. an automatic stabilizer. D. the marginal propensity to consume.
If the government wanted a tax to raise a great deal of revenue but not burden producers much, it would want to tax an industry with
a. elastic supply and demand curves. b. inelastic supply and demand curves. c. inelastic supply and elastic demand. d. elastic supply and inelastic demand.
Figure 3-3
In , if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as
a.
a shift in the demand curve to D2.
b.
a shift in the demand curve to D3.
c.
a movement downward to the right along the original demand curve D1.
d.
none of the above.
The precautionary demand for money arises
A. because people feel relatively certain what the future will bring. B. because individuals are uncertain about the future. C. when nominal income exceeds potential income. D. as important exceptions to the Keynesian model. E. because the transaction demand for money is never adequate to absorb the money supply.