The wealth effect:
A. is not present when wages keep pace with inflation.
B. is the positive relationship between consumer spending and the overall price level.
C. explains the downward-sloping aggregate demand curve.
D. explains how the aggregate demand curve shifts.
Answer: C
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Assume the market for cage-free eggs is perfectly competitive. All else equal, as more farmers choose to produce and sell cage-free eggs, what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?
A) The equilibrium price is likely to remain unchanged and profits are likely to increase. B) The equilibrium price is likely to decrease and profits are likely to decrease. C) The equilibrium price is likely to increase and profits are likely to increase. D) The equilibrium price is likely to increase and profits are likely to remain unchanged.
Consider the market for medical doctors. Suppose the opportunity cost of going to medical school decreases for many individuals. Suppose it generally takes about ten years to become a practicing doctor. Holding all else constant, in ten years the equilibrium wage for doctors will
a. increase. b. decrease. c. not change. d. It is not possible to determine what will happen to the equilibrium wage.
Which would be the most accurate statement?
A. Liberals all agree that if we could provide a job for every American who needs one, we could end nearly all poverty within a generation. B. Barbara Ehrenreich and Frances Fox Piven point out that an increasing number of jobs do not pay enough to subsist on. C. Lisabeth and Daniel Schorr believe that poor teenage girls allow themselves to get pregnant so that they could go on welfare. D. Charles Murray faults our economic system for not providing enough well-paying jobs, which, in turn, has led to widespread poverty.
In considering the distribution of the gains from trade:
A. The gains are generally split equally between small and large countries. B. Smaller countries usually get a larger proportion of the gains from trade. C. No statement can be made about the general nature of the split. D. Larger countries usually get a larger proportion of the gains from trade.