An increase in disposable income
A. decreases consumption because it shifts the consumption schedule downward.
B. increases consumption because it shifts the consumption schedule upward.
C. increases consumption by moving upward along a given consumption schedule.
D. decreases consumption by moving downward along a given consumption schedule.
Answer: C
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Debtors gain and creditors lose when
A) the anticipated rate of inflation is greater than the actual rate of inflation. B) the anticipated rate of inflation is less than the actual rate of inflation. C) the anticipated rate of inflation is the same as the unanticipated rate of inflation. D) the unanticipated rate of inflation is zero.
Suppose a plaintiff hires a lawyer to represent her in a court case. She agrees to pay the lawyer a wage per hour. She knows precisely what the lawyer should do and how long each activity should take, and she can verify that the lawyer has correctly completed each activity. She can terminate the contract at any time. With this contract,
A) the lawyer bears all the risk. B) the risk is shared by the lawyer and the plaintiff. C) production efficiency can be achieved. D) production efficiency is impossible.