Suppose that the interest rate paid to savers increases. As a result, Tom wishes to save less. This suggests that, for Tom,
A) the substitution effect is greater than the income effect.
B) the income effect is greater than the substitution effect.
C) utility maximization is not occurring.
D) future consumption is a luxury.
B
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Why is the price elasticity of supply greater if there is more time for adjustment to an increase in the price of an item?
What will be an ideal response?
Nonactivists hold that
A) activist monetary policies are likely to be destabilizing rather than stabilizing. B) economic fine-tuning is quite feasible. C) flexibility in wages and prices is sufficient to allow the economy to return at a reasonable speed to full-employment output. D) a and c E) all of the above
The change in output resulting from the addition of one more worker is
A. average physical product. B. marginal revenue product. C. marginal physical product. D. average revenue product.
If interest rates near zero fail to stimulate borrowing, the economy is in a
A. hyperinflation. B. housing bubble. C. money pit. D. liquidity trap.