Every luxury good is a normal good but not every normal good is a luxury.
Answer the following statement true (T) or false (F)
True
Rationale: Luxuries are goods whose consumption increases with income by a bigger percentage than income --- so they are normal goods (whose consumption moves in the same direction as income). But a good whose consumption increases with income at a rate less than income is still a normal good without being a luxury good.
You might also like to view...
Banks will keep excess reserves when
A. they do not foresee profitable opportunities to make loans. B. business conditions generally are depressed. C. they do not foresee opportunities to make secure loans. D. All of these responses are correct.
If Qs = -20 + 10p, and Qd = 400 - 20p, what is the equilibrium quantity?
A) 440 B) 146.6 C) 360 D) 120
Why do people hold money (currency and checking account balances), and thereby forgo earning interest or dividends from a financial investment?
a. Some money is demanded for everyday transactions like parking fees, lunch, and buying groceries. b. Some money is demanded as a precaution against unexpected costs such as automobile repairs, speeding tickets, or temporary loss of a job. c. Some money is demanded for speculative purchases of stocks, bonds, or collectibles in case they become available at a particularly low price. d. All of the above are correct.
Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved. The new equilibrium level of GDP for the economy will be higher by approximately:
a. $1 billion. b. $350 million. c. $65 million. d. $227.5 million. e. $227.5 million.