Question

Multiple Choice:

1.) A 'Stable' market is one in which:

A. will not return to its previous equilibrium price and quantity.

B it will return to its previous equilibrium price and quantity.

C is always in equilibrium regardless of market conditions.

D a and c.

E b and c.

F none of the above.

2.) Identify the most efficient economic model listed below:

A. explains 90% of observed economic behaviour with complicated variables.

B. explains 90% of observed economic behaviour with few variables.

C. explains 90% of observed economic behaviour with many variables.

D. any of the above.

E. none of the above.

3.) Please match the National Income Accounting Economic Model (GDP = AI) description with the best fitting relationship.

A. Simple Closed No Government. a. I = S

B. Simple Open No Government. b. I - S = (T - R) - G

C. Simple Closed. c. (X - M) = (T - R) - G

D. Simple Open. d. (X - M) = S - I

Answer 1

1.

it will return to its previous equilibrium price and quantity.

Reason: A stable market is characterized by minimal fluctuations due to changes is market conditions, and which always return to their market equilibrium after adjustments.

2.

Any of the above

Reason: As long as the variables explain 90% of the observed economic behaviour, type of variables do not make much of a difference

3.

I = S

Reason: In a closed economy with no government intervention, equilibrium is achieved at the point savings equal investment