A decrease in disposable income causes a shift in the consumption function
a. True
b. False
Indicate whether the statement is true or false
False
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Other things equal, contractionary fiscal policy will lead to:
a. an increased budget deficit (assuming an initial budget deficit). b. a reduced budget surplus (assuming an initial budget surplus). c. an expanded budget surplus (assuming an initial budget surplus). d. increased government purchases.
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had
a. increased, so it would increase production. b. increased, so it would decrease production. c. decreased, so it would increase production. d. decreased, so it would decrease production.
In a fixed exchange rate system, the center country, to whose currency the other countries peg their exchange rate, will:
A) find it difficult to conduct autonomous monetary policy. B) find it difficult to conduct autonomous fiscal policy. C) easily implement monetary and fiscal policy to suit its economy. D) defer to advice from other countries in conducting its domestic policy.
In the long run, monopolistically competitive firms have:
A. excess capacity. B. positive profits. C. minimal average costs. D. homogeneous production.