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Which concept refers to a state where no individual actor can be made better off without making at least one individual worse off?
ANash Equilibrium
BKaldor-Hicks Efficiency
CEdgeworth Box Balance
DPareto Efficiency (Pareto Optimality)
Arrow’s Impossibility Theorem demonstrates that no social choice mechanism can convert individual preferences into a consistent social ranking without violating:
AFiscal budget constraints
BDemocratic principles (such as non-dictatorship and Pareto efficiency)
CMonetary policy neutrality
DThe law of diminishing marginal returns
Personal Disposable Income is calculated by subtracting which item from Personal Income?
AIndirect business taxes
BPersonal direct taxes and non-tax payments
CUndistributed corporate profits
DSocial security contributions
The liquidity preference curve (demand for money) shifts rightward if there is an increase in:
AThe central bank discount rate
BCommercial bank reserve requirements
CThe general price level stability
DNominal income or total national output
The High-Employment (Structural) Budget Deficit measures what the government budget deficit would be if:
AUnemployment were exactly zero
BThe economy were operating at potential full-employment GDP
CTax rates were doubled
DInflation were eliminated
The Rational Expectations Hypothesis in macroeconomics was pioneered by:
AJohn Maynard Keynes
BMilton Friedman
CArthur Laffer
DRobert Lucas and Thomas Sargent
According to the Lucas Critique, traditional macroeconomic evaluation of policy rules fails because:
AEconomic agents alter their expectations and behavior when policy rules change
BData collection is inherently inaccurate
CMonetary policy has no time lag
DFiscal multipliers are always constant
The third-degree price discrimination occurs when a firm charges different prices to different customer groups based on their:
ADifferences in price elasticity of demand
BVolume of purchases only
CExact individual reservation prices
DGeographic production location
The substitution effect of a price change is always:
ANegative (acts in the opposite direction of the price change)
BPositive
CZero
DEqual to the income effect
For a normal good, the income effect and substitution effect of a price fall work:
AIn opposite directions
BIn the same direction to increase quantity demanded
CTo decrease total consumption
DTo leave utility unchanged