Suppose that macroeconomic forecasters predict that the economy ...

[jparksx]

Suppose that macroeconomic forecasters predict that the economy will be expanding in the near future. How might managers use this information?
 
  What will be an ideal response?

Question 2

Suppose that the interest rate paid to savers increases. As a result, Tom wishes to save less. This suggests that, for Tom,
 
  A) the substitution effect is greater than the income effect.
  B) the income effect is greater than the substitution effect.
  C) utility maximization is not occurring.
  D) future consumption is a luxury.

[tofugiraffe]

Answer to Question 1

Economic expansion increases consumer incomes, which will increase the demand for normal goods and decrease the demand for inferior goods. Thus a producer of normal goods might be anticipating a future increase in demand and thus considering expansion, while a producer of inferior goods might be preparing for a decrease in demand and considering contraction or a movement into a different good line.

Answer to Question 2

B

[jparksx]

Correct answers!

[tofugiraffe]

Great! Please up vote