Misperceptions theory best explains why
A. the LRAS curve is horizontal.
B. the SRAS curve is positively sloped.
C. the AD curve is negatively sloped.
D. the LM curve is positively sloped.
Answer: B
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One important difference between the political process and the market process is that
A) the political process results in collective actions that maximize economic surplus, while the market process may lead to efficiency losses. B) the political process results in collective actions in which everyone is made better off, while the market process results in actions that favor some groups only. C) the political process results in collective actions in which not everyone is required to participate, while in the market process individuals are obliged to participate. D) the political process results in collective actions in which everyone is obliged to participate, while in the market process individuals are free to participate or not.
GNP and GDP are important economic variables, because of their close association to:
a. Economic well-being and the exchange rate. b. Real interest rates and the nominal exchange rate. c. Nominal and real interest rates. d. Nominal interest rates and real exchange rates. e. Economic well-being and unemployment.
The economy has no international trade and no income taxes. In the short run, if government purchases were to decrease by $25 billion and the marginal propensity to consume was equal to 0.66 then real GDP would decrease by
A) $16.5 billion. B) $37.8 billion. C) $8.25 billion. D) $75 billion.
The measure of how easily a particular asset can be converted quickly to cash without much loss of value is called:
A. liquidity. B. intermediation. C. risk. D. default line.