A consumer makes purchases of an existing product X such that the marginal utility is 10 and the price is $5. The consumer also tries a new product Y and at the current level of consumption it has a marginal utility of 8 and a price of $1. The utility-maximizing rule suggests that this consumer should:
A. Increase consumption of product X and decrease consumption of product Y
B. Increase consumption of product X and increase consumption of product Y
C. Increase consumption of product Y and decrease consumption of product X
D. Decrease consumption of product Y and decrease consumption of product X
C. Increase consumption of product Y and decrease consumption of product X
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The earned income tax credit (or EITC):
A. reduces the sales tax paid by low-income workers. B. provides tax credits to firms who hire low-income workers. C. gives low-income workers credits on their federal income taxes. D. reduces the tax rate on investment income.
If the nominal interest rate is 5 percent and there is no inflation, then the real interest rate:
a. exceeds 5 percent. b. is less than 5 percent. c. is 5 percent. d. is zero.
One role of households in the circular flow model is that of ______.
a. distributing goods and services b. purchasing goods and services c. selling goods and services d. producing goods and services
The exchange-rate policy of a "crawling peg," adopted by the Chinese government in 2005, means that the government
A. allowed small and controlled changes in the exchange-rate value over time. B. pegged the yuan to the U.S. dollar at the equilibrium exchange rate. C. caved in to pressures from foreign governments. D. slowly adjusted the currency composition of its official international reserve assets toward more U.S. dollar-denominated bonds.