QUIZ-III-ECO-3203-W2002-solaa

D they must be traded through financial

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Unformatted text preview: ll consumers must be identical. d) they must be traded through financial intermediaries. Answer: (a) 34) The endowment point is the consumption bundle in which a) first-period consumption is equal to zero. b) second-period consumption is equal to zero. c) the consumer finds the most utility. d) consumption is equal to disposable income in each period. 7 Answer: (d) 35) For the consumer to be at an optimum, it must be the case that 1 a) MRS c ,c ' = (1 + r ) b) MRS c ,c ' = (1 + r ) 1 (1 + r ) = (1 + r ) c) MRTc ,c ' = d) MRTc ,c ' Answer: (b) 36) An increase in first-period income results in a) an increase in first-period consumption, an increase in second-period consumption, and an increase in saving. b) an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. c) a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. d) an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. Answer: (a) 37) A good proxy for the flow of consumption services would be a) aggregate consumption. b) consumption of services and consumption of durables. c) consumption of durables and consumption of nondurables. d) consumption of nondurables and consumption of services. Answer: (d) 38) An increase in second-period income results in a) an increase in first-period consumption, an increase in second-period consumption, and an increase in saving. b) an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. c) a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. d) an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. Answer: (d) 39) The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the a) Friedman – Lucas theory. 8 b) permanent income hypothesis. c) Ricardian equivalence theorem. d) intertemporal substitution effect. Answer: (b) 40) A martingale has the property that a) it is inherently unpredictable. b) the best prediction of its value tomorrow is its value today. c) the best prediction of its future growth rate is its current growth rate, d) the best prediction of its value tomorrow can be computed by...
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