The income effect
A. moves in the opposite direction from the substitution effect for an inferior good.
B. is always greater than the substitution effect.
C. moves in the same direction as the substitution effect for an inferior good.
D. relates to increases in nominal rather than real income.
Answer: B
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Suppose the demand for hot dogs decreases. In the short run, firms that produce hot dogs will experience a fall in prices, which will induce them to
A) decrease production and reduce the number of workers. B) decrease production and increase the number of workers. C) increase production and reduce the number of workers. D) increase production and increase the number of workers.
According to the text, what share of the world's countries now use floating exchange rate systems?
A) 100% B) 70% C) 30% D) 15%