Isaac is 25, Sonia is 45, and Jenny is 75 . Would you suppose that each would have the same marginal propensity to consume? Whose ideas on consumption relate to age?
According to Franco Modigliani's life-cycle hypothesis, Issac and Jenny would probably have higher MPCs
than Sonia's. Issac's would be relatively high because he is just starting out and is busy buying a house, a
car, and other items that eat into his relatively modest income. Sonia's would be relatively low because her
income is at its life time peak but her spending grows only modestly, compared with when she was
younger. Jenny's would be relatively high because older people's spending patterns don't fall (it's habitual
now) as much as their incomes do when they enter retirement.
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The present value of benefits (PVB) is found as
a. the discounted value of benefits for a single period without adjusting for inflation b. ?(bt/[1+rs]t), with bt= Bt/(1 + p)t c. ?(bt/[1–rs]t), with bt= Bt/(1 + p)t d. ?(bt/[1+rs]t), with bt= Bt/(1 –p)t
The table above gives the demand schedule for a good. Using the midpoint method, find the price elasticity of demand between points A and B, between B and C, between C and D, and between D and E
What will be an ideal response?
According to real business cycle theorists, the tendency of money to lead output may be due to
A) government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date. B) the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Federal Reserve's use of all available information in trying to stabilize the price level. C) the Federal Reserve's use of all available information in trying to stabilize the price level and the Federal Reserve's use of all available information in trying to stabilize the level of economic activity. D) the Federal Reserve's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in economic activity.
The entry of new firms into a market stops when:
a. the accounting profit of existing firms falls to zero. b. the general price level in the economy rises. c. the rate of interest in the economy declines. d. the economic profit of existing firms falls to zero. e. the corporate taxes are relaxed.