Which of the following best summarizes the importance of business failure and the central idea of "creative destruction in a market economy"?
What will be an ideal response?
Business failure allows the assets and resources from that business to move into other areas where they will be more productive.
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Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B
According to the life-cycle hypothesis,
A) the present value of lifetime consumption equals the future value of lifetime income. B) the income earned in a lifetime will be evenly divided between consumption and saving. C) household consumption depends on income that households expect to receive each year, and financial markets are used to smooth consumption in response to changes in transitory income. D) households use financial markets to transfer funds from periods when income is high to periods when income is low.
If a nation's production possibilities curve is a straight line
a. the law of increasing costs does not apply b. the law of increasing costs applies c. there are no gains from trading with other nations d. the gains from trading with other nations are captured by the other nations e. the gains from trading with other nations are captured by the nation
Which of the following statements is correct?
a. The human-capital theory of education could be called a productivity-enhancing theory. b. The human-capital theory of education could be called a productivity-revealing theory. c. The signaling theory of education could be called a productivity-enhancing theory. d. The signaling theory of education has been disproven by a number of prominent economists.