In building a model the assumption that allows economists to study only the factors being analyzed is the
A) rationality assumption.
B) ceteris paribus assumption.
C) the self-interest assumption.
D) the scarcity assumption.
Answer: B
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Suppose the economy is operating below its full employment level. The Fed
A) can move the economy toward the full employment level by expanding the money supply to increase aggregate supply. B) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand through both its direct and its indirect effects. C) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand and to hold prices constant. D) is powerless to affect either aggregate demand or aggregate supply. Fiscal policy is needed.
The graph shows the market for textbooks. If the government introduces a tax of $20 a textbook, then the price paid by buyers
A) increases by $20. B) increases to $80 a textbook. C) decreases to $60 a textbook. D) is $70 a textbook. E) does not change because the demand for textbooks is perfectly elastic.
If the demand for a good is price inelastic, a tax on it will
a. raise price, raise tax revenue, shift the supply curve to the right b. lower price, lower tax revenue, shift the supply curve to the right c. raise price, raise tax revenue, shift the supply curve to the right d. raise price, raise tax revenue, shift the supply curve to the left e. lower price, raise tax revenue, shift the demand curve to the left
A person is seen placing a wager on the Super Bowl. It can be concluded that
a. the person is risk-preferring. b. the person is either risk-averse or risk-neutral, but not risk-preferring. c. the person is either risk-neutral or risk-preferring, but not risk-averse. d. we need more information before making a conclusion regarding this person's attitudes towards risk.