Explain how a higher rate of return on saving could, at least in theory, lead to lower saving
A higher rate of return on saving means that savers obtain higher income. The associated income effect means that individuals have an incentive to consume more today, as well as in the future. If this is strong enough to outweigh the substitution effect (a higher rate of return on saving encourages more saving and less consumption), then the saving rate could go down. (Another way to say this is that, with a higher return on saving, you can enjoy the same level of consumption tomorrow even if you save less today.)
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If a monopolist can perfectly price discriminate, it will
A) charge the same price for each unit sold. B) produce until price elasticity of demand equals one. C) not be concerned with the market demand. D) charge a different price for every unit sold.
Keynes assumed that wages and prices were slow to adjust in order to explain
A) persistently high unemployment. B) high inflation. C) the high level of interest rates. D) why inflation fell in recessions.
Consumer equilibrium occurs at:
a. any point of intersection between the budget line and an indifference curve. b. a point of tangency between the budget line and an indifference curve. c. the point where the slope of the indifference curve equals the ratio of the quantities. d. a point where the budget line cuts the curve from below.
A firm that attempts to pass along the cost of higher union wages to consumers in the form of higher prices will be more successful if the price elasticity of demand for its product is
A. Elastic. B. Unitary. C. Inelastic. D. Perfectly elastic.