If leisure is a normal good and the economy expands so that national income rises by 3% next year then theoretically what ought to happen to the amount of work that should take place?
What will be an ideal response?
Theoretically the amount of work could either rise, fall or stay the same. As income rises in the country as a whole there are actually two effects that are taking place at the same time. The higher wages are making the opportunity cost of leisure more expensive which should induce people to work more. But the higher income allows workers to be able to afford more leisure. Unless we know which effect is stronger – the income effect or the substitution effect there isn't any way to answer this question definitively by appealing to economic logic alone. It's largely an empirical question.
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Refer to the table above. If a trade deficit of $23,000 occurs in the next year, ________, all other variables remaining unchanged
A) gross domestic product will increase to $531,000 B) gross domestic product will fall to $325,000 C) gross domestic product will increase by $2,000 D) gross domestic product will fall by $2,000
Which of the following is an example of using money as a store of value?
A) paying for a new dress with a credit card B) paying cash for a new automobile C) paying rent with a check on a demand deposit D) keeping $200 on hand for an emergency