Michael faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old. Michael experiences a decrease in the current interest rate he earns on his savings. Michael will save
a. less in the current period if the substitution effect is greater than the income effect.
b. less in the current period if the income effect is greater than the substitution effect.
c. more in the current period if the substitution effect is greater than the income effect.
d. more in the current period, regardless of the sizes of the income and substitution effects.
a
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Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of
A) increasing return. B) capital deepening. C) diminishing returns. D) constant returns.
Which of the following increases the quantity supplied of good X but does NOT increase the supply of good X?
A) a fall in the price of a factor production used to produce X B) an advance in the technology for producing X C) an increase in the price of good Y, a complement in the production of X D) an increase in the price of X
Capital deepening shifts the output (or production function) curve upward to the right
Indicate whether the statement is true or false
Farm programs that pay farmers not to plant crops on all their land
a. hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. b. help farmers by cutting costs, which helps consumers by lowering food prices. c. help farmers by increasing total revenue in the market but hurt consumers by raising food prices. d. help farmers directly since they receive government payments but have no real effects on consumers.