Explain how changes in net wealth, the price level, interest rates, and expectations alter the consumption curve
An increase in net wealth increases consumption at each level of income (shifts the consumption curve
upward). A fall in the price level increases the real value of wealth holdings. As a result, people need not
save as much as they had, so consumption increases. An increase in the interest rate makes consumption
more expensive (credit costs more) so people spend less. The consumption curve shifts downward. A rise
in price expectations may encourage more households to buy now to beat the expected price increase
regardless of their current income, which shifts the consumption curve upward.
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The percentage of the national debt held by foreigners is approximately 25 percent
a. True b. False Indicate whether the statement is true or false
Political forces:
A. affect the price mechanism through cultural norms. B. affect the price mechanism through scarcity. C. do not affect the price mechanism. D. affect the price mechanism through the legal system.
An industry is in ________ if firms have an incentive to enter or exit in the ________ run.
A. equilibrium; long B. equilibrium; short C. disequilibrium; long D. disequilibrium; short
Saving is equivalent to withdrawing financial capital from the market.
Answer the following statement true (T) or false (F)