How do large increases in oil prices affect the economy?
What will be an ideal response?
Proponents of real business cycle theory tend to emphasize the importance of changing input prices- especially the price of oil. A large increase in the price of oil is likely to decrease the productivity of firms that use oil. Since almost all firms use oil in one form or another - oil products are a key source of energy - changes in the price of oil function like technology changes. As oil price changes can be abrupt, including large increases in the price of oil, this factor does help to explain recessions.
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What would happen to the budget line if income increases by the same percentage as the price of the two goods decreases (that is income up by, say, 10 percent and the prices down by 10 percent)?
A. A rightward parallel shift in the budget line B. A leftward parallel shift in the budget line C. An upward pivot of the budget line D. The budget line is unaffected
Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:
a. price elastic. b. price inelastic. c. unitary elastic. d. perfectly elastic.
Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the
a. demand is more inelastic than the supply. b. supply is more inelastic than the demand. c. government has required that buyers remit the tax payments. d. government has required that sellers remit the tax payments.
The biggest difference between mutual funds and life insurance policies is:
A. one is considered savings, and the other is an investment. B. one is a savings plan, and one allows you to reduce your risk. C. when you can have access to your contributions. D. when you are required to contribute to them.