The basic postulate of economics indicates that changes in incentives influence

Question

The basic postulate of economics indicates that changes in incentives influence the: Select one:

a. actions of producers but not consumers.

b. actions of consumers but not producers.

c. choices of individuals only when they buy and sell goods in the marketplace.

d. choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.

Institutions that promote economic growth include: Select one:

a. policies that provide incentives for people to produce and trade.

b. the extent of government control in markets.

c. income redistribution from the rich to the poor.

d. the amount of goods and services that are provided citizens by their government.

Economists have discovered that economic booms and busts: Select one:

a. are needless and can be eliminated.

b. should be encouraged because they help make people better off.

c. can be moderated but not eliminated.

d. cause people to specialize so they become more productive.

Inflation typically arises from: Select one:

a. a sufficiently rapid contraction of the money supply.

b. a constant money supply.

c. a sufficiently rapid increase in the money supply.

d. an increase in the price level.

Among the most powerful institutions for supporting good incentives are: Select one:

a. government price controls.

b. monopolies.

c. legal limits on excessive profits.

d. property rights.

Explanation / Answer

Answers:

1) Option D. Choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.

Explanation: Human Choices are influenced by personal costs and benefits. For instance, in most cases if there is an increase in the price of a particular commodity the demand of that commodity will come down.  

2) Option A. Policies that provide incentives for people to produce and trade.

Explanation: By introducing policies that provide incentives for people will induce them to save, invest and develop new technologies. This will result in experiencing economic growth.

3) Option C. Can be moderated but not eliminated.

Explanation: Inflation can be controlled. And it is believed that some amount of inflation is good for economic growth.

4) Option D. An increase in price level.

Explanation: Inflation is defined as the "Increase in general price level." In simple terms the purchasing power of money comes down. Therefore, for buying the same quantity of a good the consumer requires more amount of money.

5) Option D. Property Rights.

Explanation: Property rights is the authority to determine how the resources are utilized, and who owns it. Copyrights, patents and legal documents comes under this category. Incentives on these rights will induce them to contribute more by their songs, theories or inventions and in turn will result in increasing the efficiency and development of the economy.

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