Explain What Impact Each of the Following Is Likely to Have

question 72

Essay

Explain what impact each of the following is likely to have on consumption.
(a) Stock prices fall.
(b) The government announces that in 2014 and only in 2014 every family will have to pay an additional lump-sum tax of $100.
(c) Most economic forecasts indicate that the growth rate will slow down considerably over the next decade.

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Definitions:

Liquid Asset

Assets that can be quickly and easily converted into cash without significant loss in value.

Store Of Value

An asset that can be saved, retrieved, and exchanged at a later time, and is predictably useful in the future to purchase goods and services.

Medium Of Exchange

A system or object that is widely accepted in exchange for goods and services, facilitating trade by eliminating the need for a barter system.

Unit Of Account

A standard numerical monetary unit of measurement that provides a uniform measure of the value of goods and services.