A decrease in the price of a good enhances the consumer's purchasing power. The income effect applies to both normal and inferior goods by encouraging the consumer to purchase more
a. True
b. False
B
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If the nominal rate of interest on a bond was 7 percent, the inflation rate was 6 percent and an individual was in a 50-percent tax bracket, the after-tax real return on the bond would be equal to
a. 0 percent. b. .5 percent. c. 6 percent. d. 7 percent. e. none of the above.
When people donate money to a charity, they behave
A) rationally if the act gives them satisfaction. B) irrationally because the act does not benefit anyone. C) in an unpredictable manner because the act involves no incentive. D) in a way that only makes themselves worse off.
Over the past 80 years, real GDP has
a. decreased in more years than it has increased b. increased dramatically c. increased slowly d. increased moderately e. been stable
A principal disadvantage of conventional checking accounts compared to money market mutual funds is that checking accounts
A. are less liquid. B. often do not pay interest. C. cannot be used as a store of value. D. are not insured by deposit insurance.