The basic purpose of economic models is to
a. construct simplifying assumptions about the real world
b. explain reality in all its complexity
c. collect empirical data to support the facts
d. construct situations where controlled experiments can be carried out
e. provide explanations for, and predictions of, economic events
E
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Classical growth theory predicts that increases in real GDP per person will
A) last because people make choices in the pursuit of higher profits. B) not last because higher income encourages smaller families and a lower population growth rate. C) not last because higher income leads to a population explosion. D) last because higher growth leads to new technology. E) last only if the government directs firms to make more investments in capital and new technology.
Economic theory assumes that the goal of firms is to maximize
a. sales b. total revenue c. profit d. price e. utility
External costs are those costs:
A. that fall directly on an economic decision maker. B. that fall indirectly on an economic decision maker. C. that are imposed without compensation on someone other than the person who caused them. D. that are both social costs and private costs.
Most economist agree that money changes real GDP in both the short and long run
a. True b. False Indicate whether the statement is true or false