In the early 2000s, Chinese officials indicted members of a forgery syndicate that sold several hundred diplomas to high school graduates who needed the diplomas to take employment tests. This situation, where having the certificate of knowledge is more important than the knowledge itself, is known as:
A. the brain drain.
B. human capital.
C. certification.
D. credentialism.
Answer: D
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If a firm in a perfectly competitive industry experiences persistent losses, in the long run it should
A) shut down temporarily and wait for market conditions to change. B) continue to operate if it can raise the demand for its product through advertising and quality improvements. C) exit the industry. D) raise its price to cover average total cost.
Normative economics is
A) analysis involving value judgments about economic policies; or a statement of "what ought to be." B) analysis that is strictly limited to making either purely descriptive statements or scientific predictions. C) analysis of the behavior of the economy as a whole. D) decision making undertaken by households and business firms.
Suppose a representative household holds a bond that is expected to pay a real return of $100 one year from now. However, over the next year, the inflation rate rises 15 percent more than was originally anticipated. As a consequence:
a. the real value of household wealth will increase. b. consumption spending will increase, and aggregate demand will rise. c. the purchasing power of money will rise. d. savings will fall and aggregate expenditures will rise. e. the aggregate expenditure in the economy will decrease.
In the loanable funds market, an increase in the desire to save is translated into a(n)
a. increase in investment spending and slower growth in the capital stock b. decrease in investment spending and slower growth in the capital stock c. decrease in investment spending and faster growth in the capital stock d. increase in investment spending and faster growth in the capital stock e. increase in investment spending but with no growth in the capital stock