Figure 7-8
Of the graphs in Figure 7-8, which resembles marginal cost?
a.
1
b.
2
c.
3
d.
4
b
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Suppose current government spending decreases and that individuals expect future government spending to decrease. Given this information, in which of the following cases will output in the current period be more likely to decrease?
A) Individuals consider only the short run effects of changes in future macro variables when forming expectations of future output and future interest rates. B) Individuals consider only the medium run effects of changes in future macro variables when forming expectations of future output and future interest rates. C) Individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. D) The output effects will be the same in B and C.
An increase in net wealth will: a. increase consumption and saving at each level of income
b. increase saving and decrease consumption at each level of income. c. decrease consumption and saving at each level of income. d. increase consumption and decrease saving at each level of income. e. have no effect on consumption because consumption is a function of income.