Refer to Figure 4.1. The substitution effect of the price change in food on the quantity of food purchased is:
A) the change from F3 to F1.
B) the change from F3 to F2.
C) the change from F2 to F1.
D) the change from F1 to F2.
E) none of the above
B
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Compromise between the desire to facilitate international trade and the need to give domestic governments latitude to govern their economies is called
a. economic structuralism. b. embedded liberalism. c. reciprocity. d. voluntary export restraint.
If the CPI is used as a cost of living index, incomes that are adjusted to reflect the changes in the CPI will
A) increase by more than the actual change in the cost of living. B) decrease by more than the actual change in the cost of living. C) increase by more than the actual change in quantities. D) decrease by more than the actual change in quantities. E) generally rise by about 2 percent a year because the standard of living generally rises by about 2 percent a year.