The demonstration effect suggests that people will save less when they
A. control their spending in order to save more when the real interest rate increases.
B. recognize that the real interest rate has increased.
C. base their spending decisions (and consequently their saving decisions) on spending decisions of others who spend more than they do.
D. base their saving decisions on their projections of income and spending needs over their lifetime.
Answer: C
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The concept of opportunity cost is more applicable to society as a whole than it is for an individual household.
Answer the following statement true (T) or false (F)
The response of investment spending to an increase in the government budget deficit is called
A) private dissaving. B) expansionary investment. C) income minus net taxes. D) crowding out. Figure 21-5
The change in the money supply in an economy is measured as:
a. the difference between the government deficit and government borrowing. b. the sum of a change in high-powered money and the change in tax revenues. c. the difference between government borrowing and government spending. d. the ratio of the change in excess reserves to the deposit expansion multiplier. e. the change in the government budget deficit.
Which of the following is correct?
A. The excess capacity problem diminishes as the monopolistically competitive firm's demand curve becomes less elastic. B. The excess capacity problem means that monopolistically competitive firms typically produce at some point on the rising segment of their average total cost curve. C. The greater the degree of product variation, the lesser is the excess capacity problem. D. The greater the degree of product variation, the greater is the excess capacity problem.