Which of the following is NOT an assumption of the classical model?
A. People are motivated by self-interest.
B. Money illusion exists.
C. Wages and prices are flexible.
D. Pure competition exists.
Answer: B
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Utility theory assumes that marginal utility:
a. increases as an individual consumes more of a product. b. decreases as an individual consumes more of a product. c. is zero as long as the individual derives utility from the product. d. is constant as long as the individual derives utility from the product. e. is constant as long as the individual derives satisfaction from the product.
The combination of frictional and structural unemployment is the:
a. cyclical rate of unemployment. b. transitional rate of unemployment. c. civilian rate of unemployment. d. natural rate of unemployment.
Which of the following correctly describes the trend in the federal budget during the 1980s?
a. Federal spending declined relative to GDP, while federal revenues rose relative to GDP. b. Federal spending rose relative to GDP, while federal revenues declined relative to GDP. c. Balanced budgets were passed though cooperation between the president and Congress. d. The dollar depreciated, thereby lowering the deficit.
Which country has a surprising life expectancy, and why?
a. Japan has the highest life expectancy even though it ranks only fourth in real GDP per capita.
b. Nigeria has an unexpectedly high life expectancy for a country with a low real GDP
per capita.
c. Brazil has a very low life expectancy even though its real GDP per capita is in the
middle of this list.
d. The United States has a higher life expectancy than one might expect from its real
GDP per capita.