Why does an increase in the price level tend to cause the consumption function to shift downward?
A. An increase in the price level decreases disposable income.
B. An increase in the price level increases the demand for fixed money assets.
C. An increase in the price level decreases the value of fixed money assets.
D. An increase in the price level decreases saving and increases debt.
Answer: C
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If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of
A) adverse selection. B) moral hazard. C) asymmetric information. D) the principle-agent problem.
An economist would classify 100 shares of Apple Computer stock as capital
a. True b. False
According to the Taylor Rule: if the inflation rate is 2% and the GDP gap is 3%, what does the federal funds rate target equal?
A) 9.5 percent B) 7.5 percent C) 5.5 percent D) 8.5 percent
Economists need different models of the economy because:
A. The economy behaves differently depending on how much time has passed after a demand shock B. We need a different model to analyze a positive demand shock than we need to analyze a negative demand shock C. The way economic performance is measured of changes over time D. Prices tend to be less flexible over time