For normal goods, the income and substitution effects help explain the downward slope of the demand curve.
Answer the following statement true (T) or false (F)
True
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If there is an increase in the price of oil, then
a. unemployment rises. If the central bank tries to counter this increase, inflation rises. b. unemployment rises. If the central bank tries to counter this increase, inflation falls. c. unemployment falls. If the central bank tries to counter this decrease, inflation falls. d. unemployment falls. If the central bank tries to counter this decrease, inflation rises.
A firm that incurs an emissions charge for polluting will install more pollution control equipment only if the:
a) Emissions charge exceeds the increased cost of installing the equipment. b) Emissions charge falls. c) Equipment will reduce pollution. d) Equipment cost is less than the marginal cost of production.
Sam decides to join the Gigantic State University's rugby team when he learns that his health insurance will pay for any subsequent injury. This illustrates:
A. the diagnosis-related-group system. B. a "pay or play" system. C. the moral hazard problem. D. the Coase theorem.
If the Fed purchases government bonds, it
A) decreases bank reserves and the supply of money. B) decreases bank reserves but increases the supply of money. C) increases bank reserves and the supply of money. D) increases bank reserves but decreases the supply of money.