The income effect of a decrease in the price of legal services (a normal good) is a(n)
a. decrease in the demand for legal services
b. decrease in the quantity demanded of legal services
c. increase in the demand for legal services
d. increase in the quantity demanded of legal services
e. new demand curve because everything else is no longer constant
D
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A ________ yield curve predicts a future increase in inflation
A) steeply upward sloping B) slight upward sloping C) flat D) downward sloping
Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 12 percent:
a. neither the borrower nor the lender benefits from inflation. b. both the borrower and the lender lose from inflation. c. the borrower benefits from inflation, while the lender loses from inflation. d. the lender benefits from inflation, while the borrower loses from inflation.
Assume that eggnog and cookies are complements. If the price of eggnog goes up, what happens to the demand for cookies?
a. demand for cookies increases b. demand for cookies decreases c. demand for cookies remains unchanged d. the shift in demand will depend on the original price of cookies
Which of the following is a true statement?
a. Unanticipated inflation is a change in the general level of prices that catches most decision makers by surprise. b. High and variable rates of inflation are easy for decision makers to forecast accurately. c. High and variable rates of inflation can increase GDP by reducing investment. d. When decision-makers are able to anticipate slow, steady rates of inflation, prices become more unstable and there is a negative impact on the level of prosperity.