The principles of economics cannot explain which of the following:
A. How the value of money changes over time.
B. Why people choose to work or go to college.
C. How the temperature index is measured.
D. Why a country might prosper.
Answer: C
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A "normal good" is defined as any good in which
A) a rise in its price will reduce quantity demanded. B) a fall in its price will increase quantity demanded. C) a rise in income will reduce overall demand. D) a fall in income will reduce overall demand.
If the federal budget has an actual budget deficit of $100 billion and a cyclically adjusted budget deficit of $75 billion, then the economy
A) must be at potential real GDP. B) must be above potential real GDP. C) could be below or above potential real GDP. D) must be below potential real GDP.
If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place, in the short run aggregate output will
A) fall in the new classical view, but not in the new Keynesian view. B) fall in the new Keynesian view, but not in the new classical view. C) fall in both the new Keynesian and new classical views. D) remain at full employment in both the new classical and new Keynesian views.
Explain why having different marginal rates of substitution is necessary for trade to occur
What will be an ideal response?