As income increases, consumption increases too, but not as rapidly. This is a statement of the:
A. Production function.
B. Consumption function.
C. Substitution effect.
D. Income effect.
E. Wealth effect.
Answer: B. Consumption function.
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Assuming a long-run aggregate supply curve, a decrease in taxes results in ________ in output and ________ in price level
A) no change; an increase B) an increase; no change C) a decrease; a decrease D) no change; a decrease
In the short run, a firm in a monopolistic competition will produce the amount of output where its
A) marginal revenue equals marginal cost and will set its price according to the demand for that amount of output. B) marginal revenue equals marginal cost and takes the market price as given. C) average revenue equals average cost and will set its price according to the demand for that amount of output. D) average revenue equals its average cost and takes the market price as given.
Refer to Figure 22-5. Based on the "catch-up line" drawn above, poorer countries are more likely to be at a point like ________, where growth in GDP is relatively ________, while richer countries are more likely to be at a point like ________, w
growth in GDP is relatively ________. A) B; high; A; low B) B; low; A; high C) A; high; B; low D) A; low; B; high
In the Taylor rule, does the target for the federal funds rate respond differently for a recession caused by a decrease in aggregate demand and for a recession caused by a decrease in short-run aggregate supply? Explain whether there is or is not a
difference in how the target for the federal funds rate changes.