problem with the price system

Quiz 3

Question 1 of 10

10.0/ 10.0 Points

Which of the following is a problem with the price system that can lead to a breakdown in the coordination of economic activity?

A.The price system works silently in the background.

B.Prices can be slow to adjust.

C.Prices may be flexible.

D.all of the above

Question 2 of 10

10.0/ 10.0 Points

If prices are sticky

A.economic activity will be coordinated efficiently.

B.economic activity will not be coordinated efficiently.

C.prices will quickly adjust to changes in demand.

D.quantity supplied will always equal quantity demand.

Question 3 of 10

10.0/ 10.0 Points

What are some reasons why coordination of economic affairs through the price system may not work perfectly?

A.may be too few prices (that is, more markets than prices),

B.prices may not contain sufficient information

C.prices may be “sticky.”

D.all of the above

Question 4 of 10

0.0/ 10.0 Points

One reason the aggregate demand curve is downward sloping is because of the

A. interest rate effect.

B.welfare effect.

C.price effect.

D.tariff effect.

Question 5 of 10

0.0/ 10.0 Points

Which of the following would cause an increase in aggregate demand in the short run?

A.an increase in the supply of money

B.a decrease in the price level

C.an increase in taxes

D.a crop failure

Question 6 of 10

10.0/ 10.0 Points

The long-run aggregate supply curve is

A.downward sloping.

B.upward sloping.

C.a vertical line at potential output.

D.a horizontal line at the current price level.

Question 7 of 10

0.0/ 10.0 Points

In the long run

A.price and output levels are mutually dependent.

B.the level of output depends on the price level.

C.the level of output is independent of the price level.

D.the price level depends on the level of output.

Question 8 of 10

10.0/ 10.0 Points

What are the two tools of fiscal policy that governments can use to stabilize an economy?

A.government spending and technology improvements

B.government spending and taxation

C.taxation and controlling imports

D.taxation and controlling exports

Question 9 of 10

0.0/ 10.0 Points

An increased federal budget deficit resulting from a recession can actually help stabilize an economy through transfer payments because an increased budget deficit will ________ transfer payments and thereby ________ the income of some households.

A.increase; increase

B.increase; decrease

C.decrease; increase

D.decrease; decrease

Question 10 of 10

10.0/ 10.0 Points

Using expansionary policies to combat a recession would

A.increase a budget deficit.

B.increase a budget surplus.

C.decrease discretionary spending.

D.increase federal revenue.

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