To correct a nominal quantity for changes in the price level, one should:
A. multiply it by a price index.
B. divide it by a price index.
C. add a price index to it.
D. subtract a price index from it.
Answer: B
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Which of the following is NOT true of an insolvent bank?
A) Its net worth is negative. B) It may be unable to pay off its depositors. C) The value of its assets is less than the value of its liabilities. D) It must have no more deposits.
The hypothesis that people use all available information to predict the future is known as:
a. rational expectations. b. adaptive expectations. c. lagged expectations. d. trend expectations.
Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college. How would an economist look at the matter?
a. There is no opportunity cost, assuming that future earnings actually increase as expected. b. The opportunity cost is much less than it would appear, assuming that earnings increase. c. Opportunity cost is a meaningless concept in this situation. d. The college students are completely correct in all respects. e. There is still an opportunity cost, even if it is justified by higher future earnings.
Briefly and concisely define the following terms and explain their importance in the study of economics
a. excess capacity theorem b. price leadership c. kinked demand curve d. perfectly contestable market