Question # 1

A contraction in supply occurs when

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Demand shifts out wards

The supply curve shifts inwards

The quantity supplied falls when the price falls

The supply curve shifts outwards

If inflationary expectations increase, the short run Phillip's curve will

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Become vertical

Become up warding sloping

Shift to the right

Shift to the left

According to classical models the level of employment is determined primarily by

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Interest rates

The level of prices

The level of aggregate supply in the economy

The level of aggregate demand for goods and services

Why does it make sense in assume that people are rational, if you want to predict their behavior.

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People are not guided by emotions when making decisions

People wheo act in the way that best gets them what they want will tend to repeat that behavior, and will tend to learn from mistakes that they do make

People never make mistakes, and tend to make the correct choices all of the time

People always logically figure out what to do.

An increase in the price of a complement or produce.A would.

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Shift demand for product a out wants

Shift demand for product A inwards

shift supply for product A out wards

Shift supply for product A inwards

To be productively efficient a firm must produce where

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Marginal costs are maximized

Marginal costs are minimized

Average costs are minimized

Average revenue is maximized

An increase in the marginal propensity to consume will

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Increase the size of the multiplier

Increase the marginal propensity to save

Decrease national income

Reduce injections into the economy

An injection of funds into a less developed country might set off the

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Multiplier

Marginal propensity to save

Average propensity to consume

The Laffer effect

Investment is an out stable element of aggregate demand because is depends heavily on.

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Government policy

Expectations

National income

Historic trends

Economic theory assumes that people

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Act in greedy and selfish ways, without regard for the welfare of others.

Act without regard for their own interests.

Are not motivated by self interest

Are motivated by self interest but still might be concerned for the welfare of others.

The first level of output at which the long run average costs are minimized is called.

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The minimum Efficient Scale

The minimum External scale

The Maximum External scale

The maximum Effective scale.

Friend man's theory of consumption focuses on

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Past income

Current income

Disposable income

Permanent income

According to the quantity theory of money an increase in the money supply is most likely to lead ot inflation if

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The velocity of circulation decreases

The number of transactions decreases

There is deflation

The velocity of circulation and the number of transactions is constant

When internal economics of scale occur

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Total costs fall

Marginal costs increase

Average costs fall

Revenue falls

A subsidy paid to producers.

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Shifts the supply curve

Shifts the demand curve

Leads to a contractional supply

Leads to an extension of supply

According to the law of diminishing utility.

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Utility is at a maximum with the first unit

Increasing units of consumption increase the marginal utility

Marginal product will fall as more units are consumed

Total utility will rise at a falling rate as more units are consumed

A movement along the supply curve may be caused by

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A change in technology

A change in the number of producers

A shift in demand

A change in costs

A movement along the demand curve may be caused by

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A change in income

A change en the number of buyers

A change in advertising

A shift in supply

If input price adjusted very slowly to output prices, the Phillip's curve would be.

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Downward sloping

Vertical or nearly vertical

Upward sloping

Horizontal or nearly horizontal

The Philips curve shows the relationship between inflation and what?

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The balance of trade

The rate of growth in an economy

The rate of price increases

Un employment

The hypothesis that people know the true model of the economy and that they use this model and al available information to form their expectations of the future is the

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Relational expectations hypothesis.

Active expectations hypothesis

Static expectations hypothesis

Adeptive expectations hypothesis

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