If people prefer to consume goods now rather than in the future, how does anyone save money?
Generally, people are rewarded for saving in the form of interest payments. This gives a monetary benefit for saving. Further, as one's income and consumption expand, there will likely be diminishing marginal utility in additional consumption. Thus, at some point, people might choose future consumption over present consumption. People also save in anticipation of times when their income might be eliminated or reduced, such as in unemployment and retirement. Finally, people might save because they receive utility by knowing they will leave their children (or even their former college) an inheritance.
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How can the Fed reduce a continuing inflation?
a. By slowing the continuing downward shift of the aggregate supply curve b. By increasing the money supply c. By slowing the continuing leftward shift of the aggregate demand curve d. By decreasing the required reserve ratio e. By slowing the continuing rightward shift of the aggregate demand curve.
Answer the following statement(s) true (T) or false (F)
1.The belief that workers and consumers incorporate the likely consequences of government policy changes into their expectations by quickly adjusting wages and prices is known as rational expectations theory. 2.Professor Robert Lucas, of the University of Chicago, developed the Phillips curve. 3.Rational expectations theorists believe that wages and prices are flexible. 4.Rational expectations theorists believe that government policies designed to alter aggregate demand are highly effective. 5.Real business cycle theorists believe that unexpected changes in the money supply cause fluctuations in real GDP.