Questions and Answers
Which of the following assumptions is made about households in the analysis?
The government is assumed to have an active role in the national economy.
False
In the analysis, it is assumed that the economy does not import or export goods and services, indicating it is a ______ economy.
closed
What type of economy is being analyzed based on the assumptions?
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Match the following elements with their corresponding assumptions:
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Study Notes
Assumptions for Economic Analysis
- Households do not save income, suggesting all income is spent on consumption.
- Firms do not save profits, indicating all earnings are reinvested or distributed immediately.
- The government has no involvement in the economy, leading to the absence of taxes or public spending.
- The economy is portrayed as closed, meaning there are no imports or exports influencing domestic transactions.
- The analysis focuses on a simplified model of a closed economy without savings or government intervention.
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Description
This quiz explores foundational assumptions in economic analysis, emphasizing the roles of households, firms, and government. By examining the implications of these assumptions, participants will enhance their understanding of basic economic principles.
