8: Which of the following accurately describes the direction that prices and income take within the circular flow model?

a.

Firms sell labor to households, and firms earn income from households

b.

Firms sell labor to households, and households buy goods and services from firms

c.

Firms buy goods and services from households, and households sell labor to firms

d.

Firms pay wages to households, and households buy goods and services from firms

18: Which of the following scenarios could prompt government response to reduce unemployment?

a.

Product demand has declined due to a negative shock to the economy, and firms are now laying off workers to save on input costs

b.

The economy is going strong and cyclical unemployment is at 0% but there is still a positive structural and frictional unemployment rate

c.

Structural unemployment is at a high because of a strong foreign competition from importers of goods and services in the auto industry

d.

The economy is experiencing a high rate of frictional unemployment due to job applications requiring more extensive background checks

20: As disposable income increases while holding all else constant, what happens to consumer expenditures?

a.

They remain constant and GDP increases

b.

They increase by an amount consistent with the MPC and GDP increases

c.

They increase by an amount consistent with the MPC and GDP decreases

d.

They decrease by an amount consistent with the MPC and GDP increases