Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will:
A. Decrease and the consumer will respond by buying more Y and less X
B. Decrease and the consumer will respond by buying more X and less Y
C. Increase and the consumer will respond by buying more Y and less X
D. Increase and the consumer will respond by buying more X and less Y
A. Decrease and the consumer will respond by buying more Y and less X
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Steve owns a motorcycle valued at $5,000, and that is his only asset. There is a 5 percent chance that Steve will have an accident within a year. If he does have an accident, his motorcycle is worthless
Steve's utility of wealth curve is shown in the figure above. An insurance company agrees to pay Steve the full value of his motorcycle in case of an accident if he buys the company's insurance policy. The company's operating expenses are $500 per policy. With no insurance, Steve's expected wealth is A) $4,000. B) $4,500. C) $3,500. D) $5,000.
The substitution effect reflects a movement along a given
A) horizontal line. B) vertical line. C) indifference curve. D) budget line.
If the Fed wishes to increase the money supply then it should:
a. increase the required reserve ratio. b. increase the discount rate. c. buy government securities on the open market. d. do any of these.