Consider a downward-sloping demand curve. When the price of a normal good decreases, the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions and quantity demanded increases.
D) work in opposite directions and quantity demanded decreases.
A
You might also like to view...
Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national defense; an easterner can produce either 2 units of food or 1 unit of national defense
a. Show that easterners have a comparative advantage in the production of defense. b. Suppose this country has decided it wants to produce 60 units of defense. Would the country have more food to consume if the westerners produced these 60 units of defense or if the easterners produced this defense? c. Why should you have anticipated your answer to part (b) of this question? d. Now suppose this country institutes a draft and chooses people for the military randomly. Suppose further that it drafts 20 westerners and 20 easterners (who together will produce 60 units of defense). How much food will the country produce if it chooses to have a military draft? e. Compare the cost in terms of foregone food production under a draft to the cost under a volunteer army where the country pays the easterners enough to persuade them to become soldiers.
The fact that long-run growth in the U.S. has been relatively stable is consistent with the ______ model
a. endogenous growth. b. supply-side. c. Keynesian. d. neoclassical growth. e. none of the above.
Federal funds market rate is: a. the rate at which central bank provides funds to commercial banks
b. the rate charged by banks on loans to the public. c. the rate charged on loans from one bank to another provided to meet reserve requirement. d. higher than the discount rate.
The graph above shows the PPC for a country that can produce oil, which is labor intensive, or televisions, which are capital intensive. The country is currently producing at point A and not trading with the rest of the world. With trade, the world price can be represented by slope of the straight line through Point A. Which of the following is a true statement?
A) When this country produces the optimal amount with trade, workers in this country will be better off. B) When this country produces the optimal amount with trade, capital in this country will be better off. C) When this country produces the optimal amount with trade, both factors of production will be better off. D) When this country produces the optimal amount with trade, the income of factors of production will not change.