If the graph shown represents Celia's budget constraint, which of the following must be true?
A. Celia gets twice as much utility from earrings as she does from hairbands.
B. Celia will spend twice as much on earrings as she does hairbands.
C. Celia could consume either four pairs of earrings or eight hairbands.
D. All of these are true.
Answer: C
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If firms sell exactly what they expected to sell, all of the following will be true except
A) aggregate expenditure will be greater than GDP. B) there is no unplanned change in inventories. C) aggregate expenditure will be equal to GDP. D) inventories will not change, and GDP and employment will remain stable.
The primary purpose of measuring the overall level of prices in the economy is to
a. allow for the measurement of GDP. b. allow consumers to know what kinds of prices to expect in the future. c. allow for the comparison of dollar figures from different points in time. d. allow for the comparison of dollar figures from the same point in time.
Which of the following has never been a monetary policy tool of the Fed?
A) open market operations B) the required reserve ratio C) the discount rate D) the term auction facility (TAF) program E) income tax rates
In a free market system, competition generates economic efficiency only when
A) individuals take into account the full opportunity cost of their actions. B) consumers are motivated by a sense of the greater good, not their own self-interest. C) firms are motivated by a sense of the greater good, not their desire for profit. D) economic decisions are taken out the hands of individuals and placed in the hands of government officials.