Answer the following statement true (T) or false (F)
1) The consumer demand curve for a product is downsloping because marginal utility is constant when price declines.
2) The income effect explains an exception to the law of demand.
3) The substitution effect suggests that when consumers judge product quality by price, they will
substitute high-priced products for low-priced products.
4) Noncash gift-giving involves value loss when the marginal utility of the gift to the receiver is
less than the product price.
1) F
2) F
3) F
4) T
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The proposition that the price of a resource is expected to rise at a rate equal to the interest rate is called the
A) discounted present value. B) derived demand for productive resources. C) diminishing marginal revenue product. D) Hotelling Principle.
Unreimbursed medical expenses in excess of 8.5% of AGI are tax deductible.
A. True B. False C. Uncertain
Cut on tax & debt
What will be an ideal response?
Both Jones and Smith agree that the economy is in a recessionary gap. Jones proposes a tax cut and believes that it will raise Real GDP and lower the price level. Smith agrees that a tax cut will raise Real GDP, but he argues that it will not lower the price level in the short run. It follows that
A) both Jones and Smith believe that lower taxes will shift the AD curve rightward, but will not shift the SRAS curve. B) both Jones and Smith believe that lower taxes will shift the SRAS curve rightward, but will not shift the AD curve. C) Jones believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift. Smith believes that the AD curve will shift rightward and the SRAS curve will not shift. D) Smith believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift. Jones believes that the AD curve will shift rightward and the SRAS curve will not shift.