Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (C1 and C2). Any funds not spent in period 1 will earn interest (at the rate r), which will increase purchasing power in period 2 . Consider four possible reactions to an increase in r: I. C1 increases. II. C1 decreases. III. C2 increases. IV. C2 decreases. Which of these is consistent with the
hypothesis that both C1 and C2 are normal goods?
a. I, II, III, and IV.
b. I, II, and IV, but not III.
c. I, III, and IV, but not II.
d. II and III, but not I and IV.
e. I, II and III, but not IV.
e
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The supply of loanable funds schedule shows that the
A) higher the real interest rate, the more the supply of loanable funds curve shifts rightward. B) higher the real interest rate, the greater the quantity of loanable funds supplied. C) higher the real interest rate, the greater the opportunity cost of supplying loanable funds. D) higher the real interest rate, the lower the profit from making new investment. E) lower the real interest rate, the greater the quantity of loanable funds supplied.
A reverse tax, or negative income tax, is a way of creating a minimum income for all households while retaining an incentive for people to work
Indicate whether the statement is true or false
There are three balance of payments accounts. The sum of the balances on these three accounts will equal
A) the total amount of the nation's foreign borrowing. B) the total amount of the nation's foreign lending. C) zero. D) the total amount of the nation's exports. E) the total amount of the nation's imports.
If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, it was previously operating at
A) more than minimum efficient scale. B) minimum capacity. C) less than minimum efficient scale. D) minimum efficient scale.