QUIZ-III-ECO-3203-F2003-sola

D bowed out from the origin answer c 11 for the

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Unformatted text preview: bowed in toward the origin. d) bowed out from the origin. Answer: (c) 11) For the consumer to be at an optimum, it must be the case that 1 (1 + r ) = (1 + r ) a) MRS c ,c ' = b) MRS c ,c ' c) MRTc ,c ' = d) MRTc ,c ' 1 (1 + r ) = (1 + r ) Answer: (b) 12) 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) 3 13) 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) 14) The two primary explanations for the excess volatility of consumption are a) consumers’ limited life spans and credit market imperfections. b) credit market imperfections and changes in market prices. c) changes in market prices and distorting taxes. d) distorting taxes and consumers’ limited life spans. Answer: (b) 15) 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) 16) 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. b) permanent income hypothesis. c) Ricardian equivalence theorem. d) intertempo...
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