Describe the basic financial life cycle. How does the life cycle change with Social Security in the picture?
What will be an ideal response?
In the basic financial life cycle, the young spend on education and buying a home, the middle-aged build up savings, and the old use savings for medical and living costs. With Social Security, the young and middle-aged pay taxes to support the old, and the old use those transfers to provide for their living costs.
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One theory of unemployment argues that the unemployment rate will rise when
a. people have accurate expectations regarding the inflation rate. b. unexpected inflation causes people to be "fooled" by high absolute wages. c. people mistakenly believe their wages have greater purchasing power. d. people overestimate the rate of inflation.
Think of the characteristics of perfect competition and use them to decide which of the following firms is most likely to belong in a perfectly competitive market
a. pizza restaurant b. cookie producer c. bicycle store d. generic canned peas producer e. corn farm
Monopolies can earn positive economic profits in the long run while monopolistically competitive firms cannot due to
A. market power of monopolies while monopolistically competitive firms have no market power. B. barriers to entry in monopoly but not in monopolistic competition. C. economies of scale in monopolies but not in monopolistic competition. D. the less elastic demand faced by monopolies as compared to monopolistically competitive firms.
Assume households have positive wealth. If the income effect is greater than the substitution effect, a decrease in interest rates will
A. increase both saving and consumption spending by households. B. decrease saving and increase consumption spending by households. C. increase saving and decrease consumption spending by households. D. decrease both saving and consumption spending by households.