How do expectations about future income effect current and future spending?
What will be an ideal response?
When households expect future income to increase they are more likely to consume a greater portion of the disposable income now. This shifts the current consumption schedule up and the current savings schedule down. A household assumes that the future income will allow them to consume a greater amount then, lessening the need to save today.
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Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that
A) Labor costs are higher for corn producers in Japan than in China. B) China also has an absolute advantage in producing corn relative to Japan. C) Japan has an absolute disadvantage in producing corn relative to China. D) China has a lower opportunity cost of producing corn relative to Japan.
A country has pasture land where cattle are allowed to graze. However, this land is threatened by overgrazing, which can lead to erosion and a reduction in the value of the land. Which of the following solutions is socially optimal?
a. Selling the pasture land to a private buyer and letting him control the grazing time b. Providing extra security to prevent grazing c. Using a layer of artificial grass to prevent grazing d. Constructing fences and allowing grazing only in one part of the pasture land at a time
The inflow of foreign investment into the U.S. economy reflects a high level of confidence in the United States.
Answer the following statement true (T) or false (F)
If a demand curve goes through the point P = $6 and Qd = 400, then
A. $6 is the highest price consumers will pay for 400 units. B. $6 is the lowest price consumers can be charged to induce them to buy 400 units. C. 400 units are the most consumers will buy if price is $6. D. consumers will buy more than 400 if price is $6. E. both a and c