Assume That an Increase in Consumer Confidence Raises Consumers' Expectations

question 14

Multiple Choice

Assume that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today for any given level of disposable income. This shift, in a neoclassical economy, will:

• A)lower investment and raise the interest rate.
• B)raise investment and lower the interest rate.
• C)lower both investment and the interest rate.
• D)raise both investment and the interest rate.

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Definitions:

Resource

An economic or productive factor required to accomplish an activity, often considered in terms of time, labor, capital, and materials.

Complementary Resource

refers to inputs or goods that are used together with another resource or good to produce a product or service.

Marginal Revenue Product

This is the additional revenue generated from employing one more unit of a factor of production, such as labor.

Total Revenue

The total amount of money received by a company for goods sold or services provided during a certain time period.