Quiz 3 BIEB

What must the simplest model of an economy show?

• what determines both economy and supply

• what determines both demand and supply

• what determines both demand and saving

• what determines both goods market and money market

In the standard textbook model, as prices fall, what happens to total demand?

• total demand equals to total supply

• total demand falls

• total demand rises

• total demand is not equal to total suply

What does a higher real value of the money supply lead to?

• the lower interest rates

  and then to higher spending on consumer goods and

  investment

• the higher interest rates

  and then to higher spending on consumer goods and

  investment

• the higher interest rates

  and then to lower spending on consumer goods and

  investment

• the lower interest rates

  and then to lower spending on consumer goods and

  investment

What relationships do supply-side models focus on?

• 1. (1) the demand for labour as the wage rate

  varies

• 2. (2) the supply of labour as the wage rate varies

• 1 and 2 are correct

• 1 and 2 are incorrect

In the goods market, there are two “bones” to the theory of aggregate demand. What

are they?

• supply and demand

• money and goods

• consumption and saving

• consumption and investment

To get maximum profit, for how long will firms hire more workers?

• as long as the wage rate is low

• as long as the wage rate is high

• till the wage rate falls

• till the firms cannot afford to pay the wage

What will happen if a firm hires too many new workers?

• extra workers will give more profits to

  cover their wages

• extra workers can raise output enough to

  cover their wages

• extra workers will raise output enough to

  cover their wages

• extra workers cannot raise output enough to

  cover their wages

If the wage rate falls, which will be greater, the cost of an extra worker or the profits

he produces for the firm?

• the cost of an extra worker

• the profits

  he produces for the firm

• both the profits

  he produces for the firm and the cost of an extra worker

• both the cost of an extra worker and the profits

  he produces for the firm

Higher wages make it profitable to do what?

• employ more workers

• to dismiss some workers

• to raise income

• to lower profit

As the wage rate falls, what happens to the demand for labour?

• rises

• falls

• still the same

• nothing happens to it