A demand curve
A. is vertical for necessities, upward sloping for luxury goods, and downward sloping for all other goods.
B. can slope up or down depending on the tastes of the consumer.
C. slopes down because of the inverse relationship between price and quantity demanded.
D. slopes up because of the direct relationship between price and quantity demanded.
Answer: C
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In the classical model, an increase in aggregate demand will cause
A) an increase in actual output, or Gross Domestic Product (GDP). B) a decrease in actual output, or Gross Domestic Product (GDP). C) a decrease in price level. D) an increase in price level.
Why is fiscal policy less effective in an open economy than in a closed economy?
A. Expansionary fiscal policy raises demand for imports, which reduces aggregate demand. B. Expansionary fiscal policy raises interest rates, which raises the value of the currency, and reduces aggregate demand. C. Expansionary fiscal policy raises the value of the currency, which reduces demand for exports. D. Expansionary fiscal policy has all the above effects.
The self-interest model of government:
A. suggests that government officials are selfish. B. explains why there are limits on government taxation and spending. C. shows why some government projects take place even if the costs exceed the benefits. D. All of these are correct.
A country has a trade surplus when
A. its exports equal its imports. B. its government spending exceeds its tax revenues. C. its exports are less than its imports. D. its exports exceed its imports.