Which factors will cause the consumption function to shift? Which factors do not cause the function to shift?
What will be an ideal response?
The principal factors that will cause the consumption function to shift are changes in wealth, changes in the price level, and changes in consumer expectations. If wealth increases, then more consumption is possible at the same level of income. If the price level changes, fixed money assets change in value. When prices rise, fixed money assets decrease in value and consumption will decrease. As consumers become more optimistic, they will tend to spend more even if their current income is not changing. The only factor that will not shift the consumption function is disposable income. When disposable income changes, you move up or down a consumption function depending on the direction of change. If disposable income increases, then one moves up along the consumption function.
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Indicate whether the statement is true or false
If the money prices of resources changes
A) the LAS curve shifts. B) the SAS curve shifts. C) the AD curve shifts. D) the macroeconomic equilibrium is unaffected.
The figure illustrates the market for bagels. If the number of bagels is cut from 20 to 10 an hour, the deadweight loss is ________
A) $0.50 a bagel B) -$5.00 an hour C) $0 an hour D) $5.00 an hour
Which of the following is NOT a method by which unions try to increase the demand for the labor of their members?
A) increasing the marginal product of union members B) increasing the supply of the goods produced by union labor C) supporting minimum wage laws D) supporting immigration restrictions