What is the difference between an autonomous increase in consumption and an induced increase in consumption? Give an example of each
An autonomous increase in consumption is one that is caused by something other than a change in the level
of income, while an induced increase in consumption is one that is due to an increase in the level of
income. Possible examples of things that would cause an autonomous increase in consumption include an
increase in real asset or money holdings, expectations of future price increases, wider credit availability or
eligibility, lower interest rates, or lower taxes. The only thing that will cause an induced increase in
consumption is an increase in the level of income.
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If a product is a normal good, an increase in your income will
A) increase demand for the product. B) decrease demand for the product. C) increase supply of the product. D) decrease supply of the product.
In a graph of unemployment rates (on the horizontal axis) versus inflation rates (on the vertical axis), the short-run Phillips Curve is
A) downward sloping. B) vertical. C) upward sloping. D) horizontal.
The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. In the U.S
steel market, the "Buy American" provision in the 2009 stimulus package would A) reduce the producer surplus received by foreign manufacturers. B) transfer some deadweight loss to producer surplus. C) transfer some producer surplus to consumer surplus. D) convert some consumer surplus to deadweight loss.
Because prices are slow to move in the short-run, when the Federal Reserve lowers the federal funds rate
A) nominal interest rates rise. B) real interest rates fall. C) inflation falls. D) real interest rates rise.