An economic model is useful only if it:
A. contains no positive statements.
B. captures all the complexities of reality.
C. yields accurate predictions.
D. has both macro- and microeconomic applications.
Answer: C
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? Assume that Figure 4-4 shows demand for soda. An increase in the price of bottled water will change demand from
A. D1to D2. B. D2to D1. C. D3to D2. D. D3to D1.
Trade between countries is based on
A) absolute advantage only. B) monopoly power. C) comparative advantage. D) none of these choices.
Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?
A. Because it adjusts over the business cycle and reflects the fiscal stimulus of policy. B. Because it changes when policy changes, rather than when the economy changes. C. Because it changes when monetary policy changes, reflecting the interest rate cost of debt. D. Because it adjusts automatically, rather than requiring specific legislation.
Economic takeoff:
A. occurs when development becomes self-sustaining. B. will eventually occur in all developing countries. C. typically occurs in the absence of foreign investment. D. has yet to occur in any developing country.