According to the permanent income hypothesis, households will tend to react to a temporary tax cut by
A. assuming the new tax level will be permanent.
B. saving most of the additional disposable income.
C. increasing consumption sharply in response to the higher disposable income.
D. temporarily increasing their marginal propensity to consume.
B. saving most of the additional disposable income.
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Nominal GDP is
A. also called real GDP. B. a more accurate measure than real GDP. C. real GDP adjusted for changes in the price level. D. GDP measured in current prices.
An increase in income produces a parallel, outward shift in the budget line
a. True b. False Indicate whether the statement is true or false
A star basketball player signs a contract that newspaper reports say is worth $10 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth
A) $10 million as reported in the papers. B) less than $10 million since the present value of $5 million received one or more years from now is less than $5 million. C) more than $10 million because the present value of $5 million received one or more years from now is more than $5 million. D) either more or less than $10 million, depending on the value of the discount rate.
Price floors are typically accompanied by a standard series of symptoms. What are they?
What will be an ideal response?