"Supply creates its own demand" is known as
A. the Ricardian dilemma.
B. the circular flow.
C. Say's law.
D. Smith's law.
Answer: C
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A positive, pure income effect can be obtained by
A) increasing the real wage. B) increasing the tax. C) increasing the dividend. D) decreasing leisure.
The above figure shows a consumption function and a 45-degree line. Real consumption is a function of disposable income
Why is real GDP used here instead? What is measured along the vertical axis? What is measured by point B? Explain the significance of point A.
If the government increases its efforts to reduce illegal drugs which of the following would explain the possible unintended consequences—an increase in drug-related crimes.
a. More people will commit crimes as a result of the increased drug use b. Tough drug enforcement policies reduce the demand for illegal drugs. c. Drug addicts will have an even greater need for quick cash to support their habits. d. In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.
The interest rate that equates the price of a bond with the present value of its payments:
A. should always be greater than the coupon rate. B. should be the one that makes the value equal to the par value of the bond. C. will vary inversely with the value of the bond. D. will vary directly with the value of the bond.