Wes works as a delivery man and can work as many hours as he likes for $12 an hour. He typically works 40 hours a week. Recently, his pay has been cut, and Wes decides to work:
A. less hours, because the income effect dominates his labor supply decision.
B. the same amount, because the price effect dominates his labor supply decision.
C. more hours, because the price effect dominates his labor supply decision.
D. more hours, because the income effect dominates his labor supply decision.
Answer: D
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If the Fed decides to keep interest rates low when there is a large budget deficit, economists conclude that the Fed is
a. monetizing the debt. b. neutralizing the effects of the deficit. c. correcting the deficit for inflation. d. resisting the effects of the deficit.
Confusion and inconvenience costs arise when inflation a. improves the store of value function of money. b. reduces the real value of the unit of account
c. introduces tax distortions on capital gains. d. reduces the real debt burden owed by borrowers.