The circular flow model ignores a host of major economic institutions and activities. Focusing on only one basic fact about how the economy works is the model's
a. way of getting around the ceteris paribus assumption
b. disadvantage because it distorts reality
c. flaw because there is no one single fact about an economy
d. strength in providing some understanding about how the economy works
e. effectiveness in creating policy recommendations
D
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Classical growth theory proposes that real GDP growth is ________ and that real GDP per person will ________ the subsistence level
A) permanent; temporarily be above B) permanent; always be above C) temporary; temporarily be above D) temporary; be above and below
The income elasticity of demand for food
A) does not change when an individual's income changes. B) increases as an individual's income increases. C) decreases as an individual's income increases. D) is negative.
A Giffen good could be either a normal good or an inferior good
Indicate whether the statement is true or false
You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in a poor economy. Given the probabilities of each state of the economy occurring, you anticipate that your stock will earn 6.5 percent next year. Which one of the following terms applies to this 6.5 percent?
A. arithmetic return B. historical return C. expected return D. geometric return E. required return