If a consumer buys less gasoline because gas prices decreased by 10 percent, even though all other prices have also decreased by 10 percent, then
A. wages and prices are too flexible.
B. the consumer is paying too close attention to changes in relative prices.
C. the consumer has been fooled by money illusion.
D. inflation is not a problem in the economy.
Answer: C
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In the above figure, which of the following is TRUE regarding the movements from point A to B and from point C to D?
I) The movement from point A to B shows that the economy has chosen to produce 100 more jets. II) The movement from point C to D shows that the economy has chosen to produce 100 more jets. III) The movement from point A to B and from point C to D have the same opportunity cost. A) I and II B) I and III C) II and III D) I, II and III
Everything else held constant, if the federal government were to guarantee today that it will pay creditors if a corporation goes bankrupt in the future, the interest rate on corporate bonds will ________ and the interest rate on Treasury securities
will ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Borrowing to fund investment projects until the marginal rate of return falls to ________ is optimizing investment strategy for ________
A) the borrowing rate, businesses and governments B) the borrowing rate, businesses but not governments C) the borrowing rate, governments but not businesses D) zero, businesses and governments E) zero, governments but not businesses
Which of the following is not true about the housing market?
a. The price of housing will increase or decrease in order to achieve an equilibrium b. An increase in the demand for housing will cause an increase in the quantity supplied of housing c. When the demand for housing increases, the price of housing will increase but the quantity supplied will not increase in the short run d. The housing market is a unique market because most people had to borrow money to buy their homes e. The only way to increase the supply of housing is to build more houses