A theory is an abstraction used often by economists to
A. describe a problem.
B. keep all assumptions in their proper places.
C. explain why things work the way they do.
D. describe a hierarchical ordering of facts.
E. arrange variables into a graphical format.
Answer: C
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The table above gives the utility from pens and pencils. The marginal utility derived from the third pen is
A) 200. B) 155. C) 445. D) 45.
What is meant by the expected rate of return?
What will be an ideal response?
If aggregate expenditures (AE) are less than aggregate output (real GDP), then firms will:
a. have unplanned inventory accumulation. b. earn above-average profits. c. expand production and hire more workers. d. be raising their prices.
If the government's budget is balanced at the start of a recession, and the government is attempting to stabilize the economy through fiscal policy
A. a budget surplus would be expected. B. a budget deficit would be expected. C. government spending, taxes, and transfer payments must all be reduced in a fashion that preserves a balanced budget. D. it should increase government spending, lower taxes, and increase transfer payments in a manner that preserves a balanced budget. E. government spending, taxes, and transfer payments must remain unchanged.