Explain why current consumption is likely to respond less than one for one to changes in current income
What will be an ideal response?
A change in current income is not likely to be viewed with certainty as permanent. So, part of any change in temporary income will be saved and, therefore, consumption will increase by an amount less than the change in income. If the change were permanent, the change in C would be greater.
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According to this Application, during the late 1980s, Argentina pegged its currency to the U.S. dollar. After 1995, the U.S. dollar appreciated sharply on world markets. Since the Argentinean peso was pegged to the U.S
dollar, the appreciation of the dollar essentially caused A) the peso to appreciate relative to the dollar, but depreciate on world markets. B) a sharp devaluation of the dollar relative to the peso. C) a severe revaluation of the peso relative to the dollar. D) the peso to also appreciate sharply on world markets.
Workers laid off as a result of a recession suffer
A) structural unemployment. B) seasonal unemployment. C) natural unemployment. D) cyclical unemployment. E) frictional unemployment.
Stephanie listens to punk rock because her friends do. This is
A) a positive sum game. B) collusion. C) positive market feedback. D) negative market feedback.
Suppose a lazy monopolist's fixed costs are higher than the fixed costs of an efficient monopolist. In all other respects the monopolists are the same. Which of the following statements about this lazy monopolist is true?
A. It produces fewer goods than the monopolist producing efficiently. B. It charges a higher price than the monopolist producing efficiently. C. It sets price and quantity the same as the monopolist producing efficiently. D. It charges a lower price than the monopolist producing efficiently.