What type of consumer goods are most affected by the business cycle: durable goods or nondurable goods? Why?
What will be an ideal response?
Some workers lose income during a recession and cut back on their spending. Other workers fear losing their jobs or may suffer wage cuts. These workers also reduce their spending. When they cut back on their spending, workers are more likely to cut back on consumer durable goods. Consumer durable goods such as automobiles, appliances, and furniture are goods that are expected to last for three or more years. Since these goods last three or more years, the consumer can continue to use these goods for some time. The consumer will put off trying to replace these expensive goods, until his/her income position is stronger and job security more assured.
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The value of the CPI for the reference base period is always
A) 100. B) 0. C) 1. D) 50. E) None of the above, because the value of the CPI is not always the same for all reference base periods.
Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that
a. he dislikes U.S. foreign policy. b. the Irish bonds pay a higher rate of interest. c. the U.S. government is more stable than the Irish government. d. None of the above provide an economic reason for buying the riskier bond.
The payroll tax appears to be a proportional tax. In reality, it is
A. highly progressive. B. actually proportional. C. highly regressive. D. regressive on low-income persons and progressive on high-income persons.
The term "dollar votes" means:
A. inflation will occur if consumers do not spend wisely. B. government is responsible for determining what will be considered legal money. C. voters may be offered dollars to help elect certain political candidates. D. consumers "vote" for certain products to be produced by how they spend their incomes.