Question

Economists would like to know how sticky wages are. However, one issue that makes this difficult is there isn't a log of  high frequency data on wages. Most data on wages is reported

		annually
		weekly
		monthly
		hourly

A change in investment spending can affect supply as well as demand. However, supply will not be affected if

		the new equipment does not add new technology
		the new equipment adds new technology
		if no additional workers are hired along with the new equipment
		the new equipment simply replaces old equipment

If investment spending on net adds to the capital stock, we would expect that

		output would decline
		at first aggregate supply increases and later aggregate demand increases
		at first aggregate demand increases and later aggregate supply increases
		both aggregate demand and aggregate supply increase simultaneously

A change to personal income tax rates has both an income and a substitution effect on labor supply. If personal income tax rates decline,

		both the income effect and the substitution effect would lead people to decrease labor supply
		both the income effect and the substitution effect would lead people to increase labor supply
		the income effect would lead people to decrease labor supply while the substitution effect would lead people to increase labor supply
		the income effect would lead people to increase labor supply while the substitution effect would lead people to decrease labor supply

Answer 1

Answer-1. Correct option is 'd'

Economists would like to know how sticky wages are. However, one issue that makes this difficult is there isn't a log of  high frequency data on wages. Most data on wages is reported hourly. Typically non-exempt employees have their salary tracked on an hourly basis because they are paid based on each hour actually worked.

Answer-2. Correct option is 'a'

A change in investment spending can affect supply as well as demand. However, supply will not be affected if the new equipment does not add new technology. Because technological advances that improve production efficiency will shift a supply curve to the right.

Answer-3. Correct option is 'b'

If investment spending on net adds to the capital stock, we would expect that at first aggregate supply increases and later aggregate demand increases. An increase in investment on capital stock should also increase productive capacity and increase aggregate supply. Therefore investment can enable a more sustainable increase in aggregate demand.

Answer-4. Correct option is 'C'

A change to personal income tax rates has both an income and a substitution effect on labor supply. If personal income tax rates decline, means an increase in consumer's income, the income effect would lead people to decrease labor supply while the substitution effect would lead people to increase labor supply. If leisure is a normal good, the demand for it increases as income increases, this increase in income tends to make workers supply less labour so they can "spend" the higher income on leisure, this is income effect. If the substitution effect is stronger than the income effect then the labour supply slopes upward, the substitution effect would lead people to increase labor supply.