As the rate of inflation increases, the increased cost to a consumer of more frequent trips to the bank to make cash withdrawals represents an increase in the:
A. tax distortion generated by inflation.
B. erosion of the purchasing power of cash.
C. "noise" in the price system.
D. shoe leather costs of inflation.
Answer: D
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Why is it true that domestic product and national income must be equal?
A. The IRS national accounting system assures that taxes equal total income. B. The total amount of spending must equal total national sales. C. The value of final product must equal the sum of resource income that produced it. D. The total amount of income earned is eventually spent.
Flowers are more expensive on Valentine's Day than at other times of the year, yet sales of flowers are highest on that day. How does economic theory account for this?
A. Florists know that there are no substitutes for flowers, so they take advantage of consumers on Valentine's Day. B. Flowers are not subject to the law of demand C. People buying the flowers are irrational. D. An increase in demand pushes up the market clearing price of flowers.