The law of demand is illustrated when:
A) an increase in tuition encourages more students to enroll in college because the quality of education has risen.
B) an increase in the purchases of personal computers results from lower prices.
C) higher oil prices cause oil companies to drill for new sources of oil.
D) higher fees for the use of public golf courses force golfers to purchase fewer golf balls.
Answer: B) an increase in the purchases of personal computers results from lower prices.
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The menu cost theory states that
A) wages depend on the productivity of workers. B) economic agents quickly learn the likely responses of the Fed to changes in unemployment. C) the economy is characterized by perfect competition. D) prices are not fully flexible because it is costly for firms to change prices every time there is a demand change.
We are told that over the past year actual real GDP has risen by three percent. This fact alone is enough to tell us that
A) the unemployment rate has fallen. B) the inflation rate has risen. C) the actual real GDP is above natural real GDP. D) productivity has grown. E) none of the above.
In the consumption function, suppose a = 60, c = 0.75, Y = 3000, and T = 800. Consumption expenditure is
A) 2910. B) 2245. C) 1710. D) 1590. E) 1510.
Which of the following equations illustrates the equilibrium level of income with respect to the simple Keynesian closed-economy model?
a. Y = [1/(1 ? b)](a ? bT ? I + G) b. Y = [1/(1 ? b)](a + bT + I + G) c. Y = [1/(1 + b)](a ? bT ? I ? G) d. Y = [1/(1 ? b)](a ? bT + I + G) e. Y = (1 ? b)(a + bT + I + G)