The study of how people choose among the alternatives available to them is the:
A) definition of economics.
B) model of demand.
C) theory of opportunity costs.
D) method of distinguishing between microeconomics and macroeconomics.
Ans: A) definition of economics.
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According to the Ricardian equivalence theorem, a tax cut that increases the government budget deficit will have
A) a positive effect on aggregate demand because people look at changes in taxes or government spending in the present. B) no effect on aggregate demand because people only look at changes in taxes or government spending in the present. C) no effect on aggregate demand because people realize that there will be a future tax liability so that there is no increase in consumption expenditures. D) an effect on aggregate demand. The magnitude the effect will have depends upon whether the increase is caused by a reduction in taxes or an increase in government spending.
Under the liquidity premium theory, a flat yield curve indicates that investors expect future short-term rates to
A) fall. B) rise. C) remain constant. D) either fall or remain constant.
A good or service that is forgone by choosing one alternative over another is called a(n):
a. explicit cost. b. opportunity cost. c. historical cost. d. accounting cost.
Outsourcing is a term increasingly used to refer to the act of:
A. replacing relatively expensive American workers with low-wage workers overseas. B. importing raw materials into the United States from other countries. C. exporting final goods to other countries. D. hiring illegal immigrants.