The income effect of a price change results in a
A) movement along the demand curve due to a change in relative prices.
B) shift of the demand curve when income changes.
C) shift of the demand curve due to a change in purchasing power brought about by the price change.
D) movement along the demand curve due to a change in purchasing power brought about by the price change.
D
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Referring to a production possibilities curve and the goods being compared, depict the economic event. The SARS epidemic spreads rapidly throughout Toronto, Canada claiming millions of lives (capital vs. consumer goods).
A. A movement from a point inside the curve to a point on the curve B. A movement from a point on the curve to a point inside the curve C. A shift in the entire curve to the right (outward) D. A shift in the entire curve to the left (inward)
If the Federal Reserve conducts an open market sale, the
A) interest rate will decrease. B) interest rate will increase. C) interest rate will not change. D) money supply is increased.
The non-bank public chooses among various financial assets in deciding what kind of liquidity it wants to hold. It thereby increases or decreases
A) the narrowly-defined money stock (M1). B) the reserves of commercial banks. C) the reserves commercial banks are required to hold. D) all of the above, at least potentially. E) none of the above, since only the Fed can alter the money supply.
Other things being equal, if there is an increase in the price of the good measured on the vertical axis, the budget constraint will shift outward
a. True b. False Indicate whether the statement is true or false