Think of at least nine examples, three of each, that display a positive, negative, or no correlation between two economic variables. In each of the positive and negative examples, indicate whether or not you expect the correlation to be strong or weak
What will be an ideal response?
Answer: Answers will vary by student. Students frequently bring up the following correlations. Positive correlations: earnings and education (hopefully strong), consumption and personal disposable income (strong), per capita income and investment-output ratio or saving rate (strong); negative correlation: Okun's Law (strong), income velocity and interest rates (strong), the Phillips curve (strong); no correlation: productivity growth and initial level of per capita income for all countries of the world (beta-convergence regressions), consumption and the (real) interest rate, employment and real wages.
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The law of diminishing marginal utility states that as you consume more and more of a good, other things constant,
a. total utility eventually rises b. marginal utility can become positive c. marginal utility approaches, but never becomes, zero d. total utility can never become negative e. marginal utility eventually declines
(Consider This) The main focus of the vignette "Slicing the Pizza" is the:
A. equality-efficiency trade-off. B. principal-agent problem. C. impact of market power on economic efficiency. D. the highly unequal distribution of U.S. wealth.