When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. This statement describes the:
a. substitution effect.
b. income effect.
c. consumer equilibrium effect.
d. price effect.
b
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In which of the following instances is the present value of the future payment the largest?
a. You will receive $1,000 in 5 years and the annual interest rate is 5 percent. b. You will receive $1,000 in 10 years and the annual interest rate is 3 percent. c. You will receive $2,000 in 10 years and the annual interest rate is 10 percent. d. You will receive $2,400 in 15 years and the annual interest rate is 8 percent.
Michelle invested $50 in a project that has a 40% chance of being worth $80 and a 60% chance of being worth $20. One can conclude that Michelle is
A) risk averse. B) risk neutral. C) risk loving. D) extremely wealthy.
Of the following countries, in which one was the true marginal tax rate faced by the typical worker lowest and the average number of hours worked per week highest from 1993 through 1996?
A) Canada B) Germany C) Italy D) the United States
The difference between the federal budget deficit and the national debt is that the:
a. deficit is a stock variable and the debt is a flow variable. b. deficit is a flow variable and the debt is a stock variable. c. debt includes interest payments and the deficit does not. d. deficit can be positive, but the debt can not e. debt can be negative, but the deficit cannot.