Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. The price of a CD is $15 and the initial price of a DVD is $22.50. The indifference curves in the figure above (I1, I2, and I3 ) reflect Kristen's preferences
If the price of a DVD falls to $18, the income effect on Kristen's consumption of DVDs ________ the substitution effect, so a DVD is ________ good. A) partly offsets; an inferior
B) partly offsets; a normal
C) reinforces; an inferior
D) reinforces; a normal
D
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Providing a fixed number of workers with additional capital will ________ average labor productivity at a(n) ________ rate.
A. increase; decreasing B. decrease; decreasing C. increase; constant D. increase; increasing
The Consumer Price Index was 247 in year 1 and 272 in year 2. The rate of inflation in year 2 was:
a. 6 percent b. 12 percent c. 8 percent d. 10 percent
If ______ equilibrium output _______, the price level rises.
a) actual; is below potential GDP b) potential; is equal to actual GDP c) potential; exceeds actual GDP d) actual; exceeds potential GDP
The usual response of the banking system to new government regulations is
A) evasion through whatever means are necessary. B) strict compliance. C) an attempt to circumvent the regulations through financial innovation. D) bankruptcy.