A nation’s citizens often dislike the economy’s distribution of income. Explain two methods for creating a more equal distribution of income.
What will be an ideal response?
One method is to override the market distribution of income to force a more equal distribution of these incomes. A second method, that is used to varying degrees in virtually all private-enterprise economies, is to use transfer payments, sums of money that individuals receive from the government without providing any goods or services in return. By taxing wealthier individuals and giving transfer payments to poorer individuals, a more equal distribution of after-tax income may be achieved.
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If firms became more optimistic about the future of the economy, which of the following occurs?
A) Investment demand decreases, and the demand for loanable funds curve shifts leftward. B) The quantity of investment demanded increases, and there is a movement down along the demand for loanable funds curve. C) The quantity of investment demanded decreases, and there is a movement up along the demand for loanable funds curve. D) The saving decreases, and the supply of loanable funds curve shifts leftward. E) Investment demand increases, and the demand for loanable funds curve shifts rightward.
Under which of the following conditions will there be no substitution bias in the CPI?
A) Indifference curves are convex. B) Indifference curves are L-shaped. C) Indifference curves are linear. D) Indifference curves are downward sloping.