The ceteris paribus assumption is important in economics because
A. all empirical data are equal.
B. models are always complex and require as many variables as possible.
C. economic data move very slowly over time and so they can always be considered constant.
D. it would be impossible to relate the changes in one variable to another variable without holding other variables constant.
Answer: D
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Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting downward C. Aggregate demand shifting rightward D. Aggregate demand shifting leftward
If the Federal Reserve eliminated all reserve requirements the most likely result would be
A) a large number of depository institution failures because they would not have enough liquidity. B) the Federal reserve would be unable to control the money supply. C) banks would no longer be able to clear checks at the Federal Reserve because there would be no required reserves. D) the size of the money multiplier might fluctuate considerably making the Federal Reserve's job of controlling the money supply more difficult.
If parity prices are "fair" they will not cause a market surplus.
Answer the following statement true (T) or false (F)
An external cost, such as the cost generated by pollution, is
A) a cost paid by consumers of the product. B) a cost paid by producers of the product. C) a cost paid by a third party or by society at large. D) not a true opportunity cost of production.