Assume the price of good X increases. As a result, your real income decreases and you decrease the quantity of good X purchased each month. This is an example of the:
a. income effect.
b. consumer price effect.
c. revenue effect.
d. substitution effect.
e. all of these.
a
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Suppose the velocity of money is not fixed, but stable at about 4% growth per year
How could the quantity theory of money be modified to include a stable growth rate of the velocity of money? In this modified version with velocity growing at about 4% per year, what would the growth rate of the other variables need to be to cause inflation?
Consider a consumer with a choice set that emerges from an exogenous income I. Suppose that, as a result of changes in a consumer's economic circumstances, the budget line rotates outward, with the vertical intercept remaining unchanged but the horizontal intercept shifting to the right. How could this have happened if the price of the good on the horizontal axis did not change?
What will be an ideal response?