An inferior good or service is any good or service for which:
a. an increase in price causes an increase in the quantity demanded.
b. a decrease in price causes an increase in demand.
c. an increase in price causes a decrease in the quantity demanded.
d. an increase in the amount consumed causes a decrease in marginal utility.
e. an increase in income causes a decrease in demand.
e
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The chapter shows that as a general rule people with more education earn higher salaries. Economists have offered two explanations of this relationship
The human capital argument says that high schools and colleges teach people valuable skills and employers are willing to pay higher salaries to attract people with those skills. The signaling argument says that college graduates earn more because a college degree is a signal to employers that a job applicant is diligent, intelligent, and persevering. How might you use data on people with two, three, and four years of college education to shed light on this controversy?
According to the Taylor rule, if inflation in the last year was 6% and output was 2% below its full-employment level, the nominal Fed funds rate should be
A) 3%. B) 5%. C) 7%. D) 9%.
Refer to the diagram below, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S1 to S3?
A. A decrease in the cost of equipment used in corn farming
B. An increase in the price of soybeans
C. A decrease in the price of corn
D. An increase in the number of acres of farmland allocated to corn
Define the multiplier. How is it related to real GDP and the initial change in spending? How can the multiplier have a negative effect?
What will be an ideal response?