Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he would have to adjust his spending
elsewhere. These examples illustrate the importance of
a. changes in total revenue in determining the price elasticity of demand.
b. a necessity versus a luxury in determining the price elasticity of demand.
c. the definition of a market in determining the price elasticity of demand.
d. the time horizon in determining the price elasticity of demand.
c
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Although GDP is not the same as economic well-being, high levels of GDP are positively correlated with all of the following except:
A. higher rates of literacy. B. higher rates of infant mortality. C. longer life expectancies. D. higher material standards of living.
When aggregate planned expenditure is less than GDP,
A) the economy definitely is at its equilibrium expenditure but even so, firms decrease production. B) firms increase production until the economy reaches equilibrium expenditure. C) the economy definitely is at its equilibrium expenditure and firms do not change production. D) firms decrease production until the economy reaches equilibrium expenditure. E) the economy might be at its equilibrium expenditure and if it is, firms do not change their production.
Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good
A) more, more B) more, less C) less, more D) less, less
Table 5.3National Income Accounts (dollar figures are in billions)Expenditures for consumer goods and services$8,200Exports$1,700Government purchases of goods and services$2,500Social Security taxes$1,900Net investment$1,400Indirect business taxes$1,400Imports$1,900Gross investment$1,800Corporate income taxes$600Personal income taxes$1,500Corporate retained earnings$130Net foreign factor income$100Government transfer payments to households$1600Net interest payments to households$500On the basis of Table 5.3, the value of the income aggregate that is defined as "the part of disposable income not spent on current consumption" (also known as savings) is
A. $370 billion. B. $500 billion. C. $8,570 billion. D. -$500 billion.