Assume that households have positive wealth. Which of the following explains how the income effect of an interest rate increase affects consumption?
A. As the interest rate increases, permanent income increases and future consumption increases.
B. As the interest rate increases, expected future income increases and future consumption increases.
C. As the interest rate increases, nonlabor income increases and current consumption increases.
D. As the interest rate increases, the opportunity cost of current consumption falls, and therefore current consumption increases.
Answer: C
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According to this Application, those communities that were more exposed to imports had larger increases in workers receiving
A) unemployment insurance. B) disability payments. C) food stamps. D) all of the above
The income effect and the substitution effect associated with a wage increase influence workers in the same direction.
Answer the following statement true (T) or false (F)
Which one of the following about a monopoly is false?
A) A monopoly status could be temporary. B) A monopoly could make profits in the long run. C) A monopoly could break even in the long run. D) A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly.
The average tax rate is calculated in the following manner:
A. Taxes Paid/Taxable Income. B. Taxable Income/Taxes Paid. C. Additional Taxes Paid/Additional Taxable Income. D. Additional Taxable Income/Additional Taxes Paid.