Draw a saving-investment diagram to show how each of the following changes shifts the IS curve.(a)Future income rises.(b)The future marginal productivity of capital increases.(c)Government purchases decrease temporarily.(d)The effective corporate tax rate increases.
What will be an ideal response?
| (a) | IS shifts up and to the right. |
| (b) | IS shifts up and to the right. |
| (c) | IS shifts down and to the left. |
| (d) | IS shifts down and to the left. |
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If a consumer is buying only two goods, A and B, then he or she will be in equilibrium only when MUa = MUb
a. True b. False Indicate whether the statement is true or false
Which of the following examples best illustrates a negative network externality?
a. Jamal goes to the theme park on weekdays to avoid the crowds. b. Jamal buys his plane ticket on sale to avoid an expected rate increase. c. Jamal goes to a movie instead of a concert because concert ticket prices increase. d. Jamal buys a season pass to the theme park to save money.
When market wages increase in a perfectly competitive market, then
A) the marginal factor cost increases. B) the marginal product increases. C) the marginal factor cost decreases. D) the marginal product decreases.
Assume that households have positive wealth. Which of the following explains how the income effect of an interest rate increase affects consumption?
A. As the interest rate increases, permanent income increases and future consumption increases. B. As the interest rate increases, expected future income increases and future consumption increases. C. As the interest rate increases, nonlabor income increases and current consumption increases. D. As the interest rate increases, the opportunity cost of current consumption falls, and therefore current consumption increases.