Which of the following best explains how consumer spending can decrease even if disposable income remains the same?
a. Supply may decrease, raising the price of many goods.
b. The value of the consumers’ assets, such as stocks or property, might rise.
c. Inflation reduces the purchasing power of consumers’ disposable income.
d. Higher interest rates cause an increase in saving and decrease in spending.
d. Higher interest rates cause an increase in saving and decrease in spending.
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If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve
A) expansionary monetary policy is ineffective. B) expansionary monetary policy is effective in the short run, but not the long run. C) expansionary monetary policy is effective in the short run and the long run. D) expansionary monetary policy is especially effective.
The following is an example of adverse selection
a. A majority of those applying for well paid jobs are well qualified b. More reckless drivers opt for cars with fewer safety devices c. Individuals living in less secure neighborhoods want to buy more insurance d. Individuals with a strong family history of heart diseases opt to buy less insurance
Fiat money has
A) little to no intrinsic value but is backed by the quantity of gold held by the central bank. B) little to no intrinsic value and is authorized by the central bank or governmental body. C) value, because it can be redeemed for gold by the central bank. D) a great intrinsic value that is independent of its use as money.
You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants. You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic
produce. What is likely to happen in the restaurant market in your hometown after you open? A) Your competitors are likely to change their menus to make their products more similar to yours. B) The demand curve facing each restaurant owner shifts to the right. C) The demand curve facing each restaurant owner becomes more elastic. D) While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic.