Assume households have positive wealth. If the income effect is greater than the substitution effect, a decrease in interest rates will
A. increase both saving and consumption spending by households.
B. decrease saving and increase consumption spending by households.
C. increase saving and decrease consumption spending by households.
D. decrease both saving and consumption spending by households.
Answer: C
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Assuming all else equal, a decrease in the real interest rate will cause:
A) an upward movement along the credit supply curve. B) a downward movement along the credit supply curve. C) the credit supply curve to shift to the right. D) the credit supply curve to shift to the left.
The total economic cost of producing a good or service is called the
a. comparative value of construction. b. social consequence of resources. c. marginal valuation of output. d. opportunity cost of production.
Suppose Michael is willing to drive across town to save 40 percent on a sweatshirt with a list price of $80. If Michael is rational, this implies that he should
A. not be willing to drive across town to save 40 percent on a microwave with a list price of $200. B. be willing to drive across town to save 40 percent on a book with a list price of $30. C. not be willing to drive across town to save $35 on a shirt with a list price of $70. D. be willing to drive across town to save 10 percent on a guitar with a list price of $320.
Which of the following is definitely not a nonexcludable public good?
A. national defense B. elementary education C. flood control D. charitable giving E. None of the above; all are nonexcludable public goods.