If the price of tea rises relative to all other prices, consumers are likely to
A. buy less coffee.
B. buy more tea.
C. buy less coffee and less tea.
D. buy less tea and more coffee.
Answer: D
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To eliminate a recessionary gap, what fiscal policy should the government pursue?
What will be an ideal response?
Inflation
A. has no impact on taxing strategies. B. can be temporarily offset with tax cuts. C. only became a tax problem in the late 1990s. D. generally affects state governments most severely.
The MU/P equalization principle means consumers will spend their income (budget) so that the MU/P ratio of the goods consumed is
a. zero for each good b. higher for goods the consumer wants the most (highest marginal utility) c. maximized for the goods the consumer wants the most (highest marginal utility) d. higher than TU/P e. the same for each good
Rational expectations theory predicts that people's expectations of higher inflation will adjust immediately, leading to an immediate decrease in the actual inflation rate
a. True b. False Indicate whether the statement is true or false