59. When time preference rises, we do not expect to see: a. consumption goods pr

Question

59. When time preference rises, we do not expect to see: a. consumption goods prices fall. b. us wanting more current consumption. c. us saving less. d. interest rates rise. e. None of the above. 60. A business cycle theory must explain all of the following except for: a. the tendency towards repetitive cycles. b. the “mammoth" cluster of entrepreneurial errors. c. the rise in unemployment compensation. d. why the depression is more intense in capital goods. e. why retail is the least and last to fall. 61. If our time preference rises and we want more current consumption, we will: a. save less, and the interest rate will rise. b. save less, and the interest rate will fall. c. save more, and the interest rate will rise. d. save more, and the interest rate will fall. e. not change how much we save and the interest rate will remain unchanged. 62. Which of the following do Austrians economists believe helps to stabilize the economy? a. Printing more money. b. More government involvement. c. Little to no government involvement. d. The Keynesian model. e. The Monetarist model. 63. Which of the following is not one of the lessons of capital structure in the ABCT? a. To consume, you must produce. b. To consume, you must first purchase goods. c. To consumer more you must save. d. Saving creates resources for investment in capital. e. Adding more money doesn't create more capital. 64. Why can’t Robinson Crusoe build the "Net and Stick" right away? a. It is too expensive and he doesn’t have enough money to buy it. b. It will take too long and he can’t save up enough berries. c. He needs to trade in the stick first in order to get the “Net and Stick.” d. He lacks the knowledge to actually build the “Net and Stick.” e. All of the above. 65. Time preference is a way to show: a. the extent to which people value current consumption over future consumption. b. Buying things tomorrow c. Saving d. Borrowing money e. Buying stock of new companies 66. According to the Austrian Business Cycle Theory, an economic collapse is the result of an: a. unsustainable boom. b. unsustainable recession. c. unsustainable trough. d. many market mechanisms that all fail at once. e. All of the above. 67. According to von Mises and the Austrians, there are business cycles because: a. the central bank lowers interest rates. b. low interest rate lead to unsustainable increase in investment. c. capital wears out at an unusually fast rate. d. All of the above. e. Only A and B of the above. 68. According to the Austrian school of thought, what should the government do to address business cycles? a. Stop inflating money. b. Don’t bail out firms. c. Don’t encourage consumption. d. All of the above. e. Only A and B of the above. 69. What role does the Federal Reserve play in the performance of our economy according to the Austrian Business Cycle Theory? a. It distorts our view of savings, making it impossible to tell whether we have enough resources to complete all of our investment projects. b. It helps to match the investments made by the investors with resources needed to carry out these investments. c. It generates savings directly, making it possible to complete our investment projects faster. d. It protects savings with a guarantee that money will be worth more when you use it later than it is worth now. e. It protects savings with a guarantee that money will be worth only 10% less when you use it later than it is worth now .

Explanation / Answer

Q59) answer: a

When time preference rises, Consumers want to increase their current consumption as they value the current consumption more than future consumption. As a result, Consumption expenditure increases and Savings fall. Consequently, interest rate rises. Also, increase in current consumption causes the price level to rise.

Q61) Answer : a

Refer to Q59 for explanation.

Q62) answer: C

The Austrian Economists believe that the market works best when it is left to the forces of demand, supply and price adjustment. Any form of government intervention is harmful for the economy. They believe that Business cycles are driven by supply side forces rather than demand side forces.

Q63) answer: b

The Austrian theory of business cycle emphasises that in order to consume, one has to produce. In the Robinson Crusoe example of berry consumption, he has to first pick berries(production) before consuming them. Also, if one wants to comsume more in future, he has to abstain himself from some current consumption and hence save more today. This saving will help him as an investment in the production of more efficient methods of production. In Robinson's case, saved berries will sustain his consumption when he is using his time in producing net and stick. Moreover, adding money will not actually create more capital but only acts an illusion.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.