What is an economic model?
A) It is a simplified version of some aspect of economic life used to analyze an economic issue.
B) It is a description of an economic issue that includes all possible related information.
C) It is a detailed version of some aspect of economic life used to analyze an economic issue.
D) It is a description of an economic issue based on official government information.
A
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Suppose you have spent your entire budget and, for all the goods you purchase, the marginal utilities per dollar spent are identical. Which of the following is true?
a. You are being irrational. b. You can increase your utility by reallocating your income. c. You will reduce your utility if you allocate income in any other way. d. You are minimizing your marginal utility. e. You can avoid diminishing marginal utility.
Which of the following will be most likely to dampen the expansionary effects of an increase in government spending financed by borrowing?
a. The budget deficit will cause business decision makers to become more optimistic. b. The increase in demand for loanable funds as the result of borrowing will cause interest rates to rise and private investment to fall. c. The increase in government spending will cause the money supply to expand, thereby causing an inflationary boom. d. The additional borrowing will cause the central bank to buy more bonds, which will reduce aggregate demand.