Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume:
A. more of good X and less of good Y.
B. more of good X and more of good Y.
C. less of good X and less of good Y.
D. less of good X and more of good Y.
Answer: A
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Net capital outflow is defined as the purchase of
a. foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. b. foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. c. domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. d. domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
Other things the same, if the money supply rises by 5% and people were expecting it to rise by 2%, then some firms have
a) lower than desired prices, which increases their sales. b) higher than desired prices, which increases their sales. c) higher than desired prices, which depresses their sales. d) lower than desired prices, which depresses their sales.