Both the PIH and the LCH predict that
A) the sum of saving and consumer durable purchases should increase in relation to personal income in booms and fall in recessions.
B) the sum of saving and consume nondurable purchases should increase in relation to personal income in booms and fall in recessions.
C) the sum of saving and consumer durable purchases should decrease in relation to personal income in booms and increase in recessions.
D) saving should increase in relation to personal income in booms and fall in recessions, but that consumer durables tend to behave in a more stable manner over a cycle.
A
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Disequilibrium occurs when quantity demanded equals quantity supplied
a. True b. False
If the economy is experiencing less than full-employment, the Keynesian school recommends that the government:
a. do nothing to stimulate the economy. b. undertake fiscal policy to stimulate aggregate demand. c. undertake fiscal policy to stimulate aggregate supply. d. balance the budget to stimulate aggregate demand.
Sydney purchases a newly issued, two-year government bond with a principal amount of $10,000 and a coupon rate of 6 percent paid annually. One year before the bonds matures (and after receiving the coupon payment for the first year), Sydney sells the bond in the bond market. What price (rounded to the nearest dollar) will Sydney receive for his bond if newly issued one-year government bonds are paying a 5 percent coupon rate?
A. $10,000 B. $10,600 C. $10,095 D. $9,906
If an excise tax is placed on a product that has a perfectly inelastic demand, then:
A. the entire tax will be paid by the consumer. B. the entire tax will be paid by the producer. C. the consumer and producer will each pay a share of the tax. D. the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply.