The income effect means that when the price of a good rises
A. you buy more normal goods and fewer inferior goods.
B. the buying power of your income falls.
C. your preferences also change.
D. consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.
Answer: B
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Which aspect of undeveloped labor markets causes unemployment in undeveloped labor markets to be misunderstood?
a. higher inflation rates b. greater government control c. barter and trade economies d. agricultural economies
Changes in real GDP reflect only changes in the amounts being produced
a. True b. False Indicate whether the statement is true or false
Which of the following individuals would most likely favor an increase in government spending, as opposed to a tax cut, as the basis for expansionary fiscal policy?
A. “There must be a constant philosophical prejudice against any intervention by the state into our lives, for by definition such intervention abridges liberty.”—William Simon B. “The bastards [read politicians] can’t spend what they don’t have.”—Howard Jarvis C. “The family that takes its mauve and cerise, air-conditioned, power-steered, power-braked automobile through cities that are badly paved, made hideous by litter, [and] blighted buildings...to picnic beside a polluted stream amid the stench of refuse may properly reflect on the curious unevenness of their blessings.”—J.K. Galbraith D. “Public expenditures are made for the primary benefit of the middle class and financed with taxes on the poor and rich.”—Director’s Law
If MRS > MRT, then the consumer is better off than at equilibrium
Indicate whether the statement is true or false