Which is true under conditions of pure competition?
A. No single firm can influence the market price by changing its output.
B. There are differentiated products.
C. The market demand curve is perfectly elastic.
D. Firms that cannot make pure or economic profits go bankrupt.
Answer: A
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Employing the government budget diagram shown in Figure 5-1 above, assume that the economy is initially in equilibrium at point A. The movement A to D represents
A) an increase in government spending and/or a decrease in taxes. B) a decrease in government spending and/or an increase in taxes. C) a decrease in government spending and a decrease in taxes. D) an increase in government spending and an increase in taxes.
Which of the following measures did the Fed take during the uncertain days following the terrorist attacks of September 11, 2001? a. The Fed tightened regulations in the financial markets
b. The Fed increased the discount rate. c. The Fed bought all the government securities up for sale. d. The Fed increased the reserve requirement ratio. e. The Fed demanded interest on the bank reserves held at the Fed.
Which of the following is not a direct determinant of net export spending?
A. Domestic income. B. Foreign income. C. Interest rates. D. Exchange rates.
The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.