Suppose Reta is planning for retirement in a two-period world. In the first period Reta is young and earns $1 million, and in the second period Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the
a. substitution effect will induce Reta to consume more when she is young.
b. substitution effect will induce Reta to consume less when she is young.
c. income effect will induce Reta to consume more when she is young.
d. change in interest rates affects the substitution effect but not the income effect.
a
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Answer the following statement(s) true (T) or false (F)
1. A Pigou tax forces car manufacturers to internalize the cost of pollution. 2. Cap and Trade is so named because the government puts a “cap” on the amount of exports that domestic firms are allowed to “trade” with foreign nations. 3. A Cap and Trade system is more prone to error than a Pigou tax. 4. Pigou taxes are unnecessary in the presence of transaction costs. 5. Pigovian analysis indicates that a subsidy should be awarded when economic activity creates social benefits.
In the ________ increases in the supply of money will ________
A) long run; lead to lower prices B) short run; raise total demand and output C) long run; raise total demand and output D) short run; decrease total demand and output
If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases by $200, the multiplier equals
What will be an ideal response?
Which of the following cases was most important for ensuring the United States an internal common market?
(a) Charles River Bridge v. Warren Bridge (1837) (b) McCulloch v. Maryland (1819) (c) Gibbons v. Ogden (1824) (d) Dartmouth College v. Woodward (1819)