What type of relationship exists between expected future income and consumption?
A. Positive
B. Indirect
C. Constant
D. Negative
Answer: A
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A Consumer Price Index adjustment overcompensates for inflation because it ignores
A) the income effect when relative prices change. B) the substitution effect when relative prices change. C) that some goods are inferior. D) that the substitution effect may offset the income effect.
Consider two upward sloping income-utility curves with income on the horizontal axis. The steeper curve represents risk preferences that are more:
A) risk averse. B) risk loving. C) loss averting. D) We cannot answer this question without more information about the shapes of the curves.
The inputs used to produce goods and services are called
a. profit factors. b. marginal products. c. labor demands. d. factors of production.
Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the vertical axis
A) is greater along curve I. B) is greater along curve II. C) is the same along both curves. D) cannot be compared for the two curves without more information.