Refer to Figure 14.2. The substitution effect of the wage decrease on the amount of hours of leisure is:
A) L1 to L0.
B) L0 to L1.
C) L1 to L2.
D) L2 to L0.
E) none of the above
C
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In the above figure, Brendan originally consumes at point A. If his income falls and compact discs are a normal good but haircuts are an inferior good then he will begin consuming at a point such as
A) B. B) E. C) F. D) G.
Inefficient use of resources is shown on the production possibilities curve
A) by an inward shifting of the curve. B) by a point inside the curve. C) by a point near the top of the curve. D) by a point outside the curve.
Which of the following groups agree that the government can take steps to reduce both the unemployment rate and the inflation rate (although they disagree on what those steps ought to be)?
a. Keynesians and supply-siders b. Keynesians and neo-Keynesians c. Keynesians and rational expectations economists d. neo-Keynesians and rational expectations economists e. classical economists, neo-Keynesians, and rational expectations economists
An experienced software engineer starts a new job with a pay package that is 14 percent higher than her previous salary. The expected inflation in the economy is 10 percent. However, the actual inflation in the following year turns out to be 14 percent. Which of the following costs of inflation did she have to bear?
a. Menu costs b. Shoe-leather costs c. Unit-of-account costs d. Time costs