Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to
a. increase his savings rate.
b. decrease his savings rate.
c. continue saving at the same rate.
d. Any of the above are possible.
a
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Once a point on a contract curve has been chosen,
A) it is possible to make both individuals better off. B) it is possible to make one individual better off only at the expense of the other. C) there is no change that would make both individuals worse off. D) it is impossible for both individuals to have more of both goods.
Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real GDP and current international transactions in the context of the Three-Sector-Model?
a. Real GDP rises, and current international transactions become more positive (or less negative). b. There is not enough information to determine what happens to these two macroeconomic variables. c. Real GDP rises, and current international transactions remain the same. d. Real GDP falls, and current international transactions become more negative (or less positive). e. Real GDP and current international transactions remain the same.