When all prices are increasing due to inflation:
A. price signals become more difficult to interpret.
B. price signals will be confused for quantity signals.
C. price signals are easier to interpret than if prices were decreasing.
D. prices do not send signals.
Answer: A. price signals become more difficult to interpret.
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When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee:
A. is a necessity because consumers buy more during a recession. B. has a negative income elasticity of demand. C. has an income elasticity of demand greater than zero but less than one. D. is normal.
Some people argue that to prevent continued dependence on foreign oil, the United States should restrict imports of foreign oil and increase domestic production. What effects would such trade restrictions have on the market for oil in the United States?
What will be an ideal response?
Kate's money income is $350, the price of X is $4, and the price of Y is $6. Given these prices and income, Kate buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J, Kate's MRS is 3. At bundle J, if Kate increases consumption of Y by 1 unit, how many units of X can she give up and still reach the same level of utility?
A. 1 B. 3 C. 1/3 D. 2/3
The Dow-Jones Industrial Average index is all of the following except
A. an index based on 30 actively traded large companies on the New York Stock Exchange. B. representative of the U.S. economy. C. the oldest U.S. stock index. D. the most widely followed U.S. stock index.