Dollar bills in the modern economy serve as money because
A) they are backed by the gold stored in Fort Knox.
B) they can be redeemed for gold by the central bank.
C) they have value as a commodity independent of their use as money.
D) people have confidence that others will accept them as money.
Answer: D
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A prisoner's dilemma illustrates situations in which:
A. resources with the lowest opportunity cost should be used first. B. there is a conflict between the narrow self-interest of individuals and the broader interests of a group. C. everyone does best when each person specializes in the activities in which he or she has a comparative advantage. D. efficiency is an important social goal.
The theory of investment that emphasizes the roles of real interest rates and taxes is known as the
A) multiplier model. B) accelerator model. C) Q-theory of investment. D) neoclassical theory of investment.
The concept of "the invisible hand" suggests that to attain efficiency, the government should
A) guide economic activity. B) set prices. C) leave prices and output decisions to the competitive market. D) regulate all production decisions, but not price decisions. E) make sure that a command system is used to allocate resources.
Which of the following helps determine the growth rate of potential GDP?
I. capital accumulation II. technology advances III. growth in the quantity of money A) I B) I and II C) I and III D) I, II and III