Until recently, shares of stock accounted for 40 percent of Jimmy's savings. A few days ago, Jimmy sold some bonds and bought some additional shares of stock. Now shares of stock account for 70 percent of Jimmy's savings. How did this change affect Jimmy's expected retun on his savings? How did it affect the risks he faces?

Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

a. In the short run, unemployment will increase and inflation will fall. b. In the short run, unemployment will increase and inflation will rise. c. In the short run, unemployment will decrease and inflation will rise. d. In the short run, unemployment will decrease and inflation will fall.

The increase in the quantity of labor supplied in response to a higher wage is called the:

A. income effect. B. substitution effect. C. price effect. D. labor effect.