What are the two effects that explain the law of demand? Briefly explain each effect
What will be an ideal response?
The two effects that explain the law of demand are the income effect and the substitution effect. The income effect is the change in quantity demanded of a good that results from a change in purchasing power due to a change in the good's price. The substitution effect is the change in quantity demanded of a good that results from the effect of a change in the good's price making the good more or less expensive relative to other goods that are substitutes.
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All of the following are part of the "state health insurance marketplaces" provision of the Patient Protection and Affordable Care Act (ACA) except
A) small businesses with fewer than 50 employees are exempt from being required to participate in the program. B) the marketplaces offer health insurance policies that meet certain specified requirements. C) each state is required to establish an Affordable Insurance Exchange. D) low-income individuals are eligible for tax credits to offset the costs of buying health insurance.
When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy, then
A) inflation will be lower. B) output will be at its potential. C) output will be lower. D) inflation will not change. E) both A and B.
The use of checks in transactions
A) entails lower information costs than the use of currency. B) entails fewer steps than settling transactions with currency. C) avoids the cost of transporting currency back and forth. D) entails lower information and fewer steps than settling transactions with currency.
Which of the following relationships reflect the law of supply?
a. an increase in QS => a decrease in Price b. a decrease in Price => an increase in supply c. an increase in Price => an increase in QS d. a decrease in Price => an increase in QS