According to the policy irrelevance proposition, real Gross Domestic Product (GDP) is determined by
A. a combination of fiscal policy and monetary policy.
B. the rate of inflation only.
C. the economy's long-run aggregate supply curve.
D. the economy's aggregate demand curve.
Answer: C
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When the quantity of real GDP demanded exceeds the quantity of real GDP supplied, firms
A) increase production and prices. B) decrease production and prices. C) increase production and lower prices. D) decrease production and increase prices. E) do not change production because aggregate demand and potential GDP will adjust.
According to the life-cycle hypothesis,
A) the present value of lifetime consumption equals the future value of lifetime income. B) the income earned in a lifetime will be evenly divided between consumption and saving. C) household consumption depends on income that households expect to receive each year, and financial markets are used to smooth consumption in response to changes in transitory income. D) households use financial markets to transfer funds from periods when income is high to periods when income is low.
When there is a tendency for a particular product to fall out favor with additional consumers because other consumers have chosen not to purchase the product
A) negative market feedback occurs. B) positive market feedback occurs. C) the tit-for-tat strategy will begin. D) the network effect will increase.
Virtual currencies are threats to a nation's economy if they endanger the country's:
a. Price and financial stability. b. Payment system. c. End users. d. All of the above