Suppose a consumer's income increases from $30,000 to $36,000. As a result, the consumer increases her purchases of compact disks (CDs) from 25 CDs to 30 CDs. What is the consumer's income elasticity of demand for CDs?
A) 0.5
B) 1.0
C) 1.5
D) 2.0
B
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Which of the following is likely to have the shortest transmission lag?
A) a change in personal income tax rates B) a change in government expenditures C) an increase in subsidies paid to firms D) an increase in public-service employment
Which of the following statements is correct?
a. If the inflation rate is steady at 5 percent, for example, the real and nominal interest rates will be equal. b. An increase in the demand for goods now compared with goods in the future would cause the real interest rate to rise. c. A "positive rate of time preference" means that an individual would rather save than consume. d. During an extended inflationary period, the money (or nominal) interest rate will usually be lower than the real rate of interest.
Other things the same, when the price level rises, interest rates
a. rise, so firms increase investment. b. rise, so firms decrease investment. c. fall, so firms increase investment. d. fall, so firms decrease investment.
Most academic studies show that Head Start benefits
A. are suspect due to the inability to test young children. B. slowly evaporate over two or three years and are not seen in testing of high school age children. C. don't exist at all, even for the children in the program. D. can be observed to last well beyond graduation from college.