An increase in demand, holding supply constant, will tend to cause:
a. Lower prices and a smaller quantity sold
b. Lower prices and a larger quantity sold
c. Higher prices and a larger quantity sold
d. Higher prices and a smaller quantity sold
Answer: c. Higher prices and a larger quantity sold
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In a recession, consumers have less income to spend. As a result, if dining out is a normal good, then which of the following would happen to the demand curve for dining out?
A) The demand curve would shift leftward. B) The demand curve would not shift but the price of dining out would rise. C) The effect on the demand curve is unknown. D) The demand curve would shift rightward. E) The demand curve would not shift but the price of dining out would fall.
Choose the incorrect statement.
A) When the quality of a good improves over time and as a result the price rises, the CPI counts the entire price rise as inflation and so overstates inflation. B) The outlet substitution bias injects an upward bias into the CPI. C) The CPI basket is constantly updated to allow for the introduction of new goods. D) When relative prices change and people substitute to the lower priced good, the CPI ignores the substitution and the CPI overstates inflation. E) All of the above statements are incorrect. C) The CPI basket is constantly updated to allow for the introduction of new goods.
For most welfare recipients, the negative income tax plan would increase incentives to work.
Answer the following statement true (T) or false (F)
According to Figure 9.3, which of the following is true?
A. Consumption is $10 billion when disposable income is zero. B. Dissaving occurs at disposable income levels above $20 billion. C. At a disposable income level of $20 billion, consumption is zero. D. The APC is greater than 1 at disposable income levels above $20 billion.