What is the impact of a rise in income ?
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Answer: C. Shift the demand curve
Explanation
A rise in income changes purchasing power and shifts the entire demand curve outward. Consumers buy more of normal goods at every given price when income increases. Changes in non-price determinants of demand always cause shifts in the demand curve. Demand curves illustrate the relationship between price and quantity demanded ceteris paribus. Normal goods experience increased demand when consumer income rises across the board. Income elasticity of demand measures the magnitude of the demand curve shift.
Businesses monitor consumer income trends to forecast future sales and production needs. Macroeconomic fiscal policies like tax cuts directly impact disposable income and consumer demand. Understanding demand shifts helps economists predict market reactions to economic growth. Option A describes a movement along the demand curve caused by a price change. Option B refers to supply curves rather than the demand curve affected by income. Option D describes an extension of demand resulting from a lower product price.
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Q3. The short-run Phillips curve implies that if policymakers adopt expansionary measures to lower unemployment ?
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Answer: A. The economy will experience an increase in inflation
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Q4. What should be the effect of an increased demand for a product ?
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Answer: D. Decrease equilibrium price and increase quantity
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Answer: A. Paper euros
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Answer: B. Aggregate supply is Perfectly inelastic
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