Flashcards on Microeconomics

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What is the theory of consumption that suggests that the average consumer accumulates wealth during their active working life, only to draw down on that wealth during their retirement years? Is it A. The Permanent Income Theory, B. The Life Cycle Hypothesis, C. Relative Income Theory, or D. Neoclassical Theory?

B. The Life Cycle Hypothesis

Given that a household's disposable income has increased by 80 units of money, what is most likely true about its consumption rate? A. The consumption rate has increased by 80 units of money. B. The consumption rate has decreased by 64 units of money. C. The consumption rate has increased by 16 units of money. D. The consumption rate has decreased by 16 units of money.

C. The consumption rate has increased by 16 units of money.

The real demand for money for the purpose of purchasing securities or other financial assets with the intent of reselling them again is known as real money demand for which motive? A. Transaction, B. Precautionary, C. Speculative, or D. Investment.

C. Speculative

What is the function or curve that represents the geometric location of the pairs of income and interest rate values that balance the money market called?

A. LM Curve

When considering the IS-LM model, what is the consequence of an increase in autonomous imports, ceteris paribus?

D. A decrease in both the equilibrium income level and the interest rate.

In an economy where the marginal tax rate increases by 3%, but none of the other variables or parameters of the economy change, what happens to the aggregate demand curve?

A. It becomes more steeply inclined (towards vertical).

An increase in demand-pull inflation can be caused by which option?

A. An increase in autonomous taxes.

What is the name of the theory of consumption that posits that the average consumer maintains a constant level of consumption regardless of fluctuations in income?

A. The Permanent Income Theory

What is the equation that describes the consumption function?

C = a + b(Y-T)

What is the name for the study of how households and firms make decisions and how they interact in specific markets?

Microeconomics

What is the name of the effect that suggests that an increase in the price level prompts an increase in production costs and thus reduces aggregate supply?

Cost-push inflation

What is the name of the measure of how responsive quantity demanded is to a change in price?

Price elasticity of demand

What is the name of the assumption that all other variables besides those under consideration are held constant for the purposes of economic analysis?

Ceteris paribus

What is the term for the amount of a product that a producer is willing and able to supply onto the market at a given price in a given time period?

Quantity supplied

What is the term for the market structure in which a single seller sells a homogeneous product in a market with no close substitutes?

Monopoly

What is the theory of consumption that suggests that the average consumer accumulates wealth during their active working life, only to draw down on that wealth during their retirement years? Is it A. The Permanent Income Theory, B. The Life Cycle Hypothesis, C. Relative Income Theory, or D. Neoclassical Theory?

B. The Life Cycle Hypothesis

Given that a household's disposable income has increased by 80 units of money, what is most likely true about its consumption rate? A. The consumption rate has increased by 80 units of money. B. The consumption rate has decreased by 64 units of money. C. The consumption rate has increased by 16 units of money. D. The consumption rate has decreased by 16 units of money.

C. The consumption rate has increased by 16 units of money.

The real demand for money for the purpose of purchasing securities or other financial assets with the intent of reselling them again is known as real money demand for which motive? A. Transaction, B. Precautionary, C. Speculative, or D. Investment.

C. Speculative

What is the function or curve that represents the geometric location of the pairs of income and interest rate values that balance the money market called?

A. LM Curve

When considering the IS-LM model, what is the consequence of an increase in autonomous imports, ceteris paribus?

D. A decrease in both the equilibrium income level and the interest rate.

In an economy where the marginal tax rate increases by 3%, but none of the other variables or parameters of the economy change, what happens to the aggregate demand curve?

A. It becomes more steeply inclined (towards vertical).

An increase in demand-pull inflation can be caused by which option?

A. An increase in autonomous taxes.

What is the name of the theory of consumption that posits that the average consumer maintains a constant level of consumption regardless of fluctuations in income?

A. The Permanent Income Theory

What is the equation that describes the consumption function?

C = a + b(Y-T)

What is the name for the study of how households and firms make decisions and how they interact in specific markets?

Microeconomics

What is the name of the effect that suggests that an increase in the price level prompts an increase in production costs and thus reduces aggregate supply?

Cost-push inflation

What is the name of the measure of how responsive quantity demanded is to a change in price?

Price elasticity of demand

What is the name of the assumption that all other variables besides those under consideration are held constant for the purposes of economic analysis?

Ceteris paribus

What is the term for the amount of a product that a producer is willing and able to supply onto the market at a given price in a given time period?

Quantity supplied

What is the term for the market structure in which a single seller sells a homogeneous product in a market with no close substitutes?

Monopoly

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