Adam and Becky both recently started new jobs. Both have determined that they should save 10 percent of their monthly income toward retirement. Adam's employer has no program established for payroll deduction, but he could easily set up automatic
withdrawals to go into a retirement fund. Becky's employer automatically directs 8 percent of the paycheck into a retirement fund, but the employee can change the percentage deducted. Behavioral economists would expect:
A. Adam to save more as he would set up a 10 percent automatic withdrawal while Becky
would stay at the default of 8 percent.
B. Becky would save more, as both would tend to stay at the defaults provided by their
employers.
C. them both to save 10 percent eventually, as both had predetermined that that was the
optimal amount to save.
D. Becky to feel a greater sense of loss by seeing funds automatically withheld each month.
Answer: B
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Refer to Figure 6-7. Using the total revenue test to verify the price elasticity between points a and b on the demand curve, demand is
A) perfectly inelastic. B) perfectly elastic. C) elastic. D) unit-elastic.
Per-unit taxes have which effect on the equilibrium price of a good?
a. They cause demand curves to shift downward, thus lowering price. b. They cause demand curves to shift downward, thus raising price. c. They cause supply curves to shift downward, thus lowering price. d. They cause supply curves to shift upward, thus lowering price. e. They cause supply curves to shift upward, thus raising price.
An increase in taxes of a given amount will have a smaller impact on real GDP than a decrease in government purchases of equal amount because
A. tax increases reduce the incentive to spend and invest. B. some of the additional tax will come from disposable income that would have been saved. C. the decline in disposable income is less than the tax increases. D. government purchases are subject to a larger multiplier than consumption purchases.
If something is a unit of account, then it:
a. serves as a yardstick for measuring the relative value of other goods b. is a means of holding wealth for the future c. is fairly stable d. is durable and portable e. is accepted as payment for any purchase