Last year, Tess bought 5 handbags when her income was $54,000 . This year, her income is $60,000 . and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about
a. 0.32, and Tess regards handbags as inferior goods.
b. 0.32, and Tess regards handbags as normal goods.
c. 3.17, and Tess regards handbags as inferior goods.
d. 3.17, and Tess regards handbags as normal goods.
d
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The nominal interest rate is 12 percent and the inflation rate is 4 percent. The opportunity cost of holding a dollar for a year is
A) 16 cents. B) 88 cents. C) 48 cents. D) 12 cents. E) 8 cents.
One effect of inflation is that it is a tax that redistributes goods and services from
A) investors to savers. B) households and businesses to the government. C) businesses to households. D) government to households. E) government to businesses.
If the marginal productivity of labor was the sole determinant of household income in the U.S., then
a. no households would be poor according to the official government definition of poverty. b. no households would be poor according to a relative definition of poverty. c. the distribution of income would be unequal. d. every household would have sufficient income to meet biological needs.
According to the interest-rate-based monetary policy transmission mechanism
A. a decrease in the required reserve ratio will lower interest rates. B. an increase in the required reserve ratio will not affect interest rates. C. a decrease in the required reserve ratio will not affect interest rates. D. an increase in the required reserve ratio will lower interest rates.