Which of the following is correct? When the price of normal good Z falls:
A) both income and substitution effects cause the consumer to buy more.
B) both income and substitution effects cause the consumer to buy less.
C) the income effect causes the consumer to buy less, but the substitution effect causes her to buy more.
D) the income effect causes the consumer to buy more, but the substitution effect causes her to buy less.
Ans: A) both income and substitution effects cause the consumer to buy more.
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The belief that higher taxes on the rich are justified because they have obtained a disproportionately large allotment of the services, infrastructure, and protections the government provides is called
A) utilitarianism. B) diminishing marginal utility. C) the benefits-received principle. D) transcendentalism.
LRE. After a decrease in AD, there will immediately be _____
a. inflation and recession b. deflation and recession c. inflation and expansion d. deflation and expansion