During a very bad recession the nation's disposable income fell by 10 percent, while its consumption of a certain good rose by 5 percent. That good was good. (LO4) a) a complementary b) a substitute c) a normal good d) an inferior good

We need to comprehend the given terms and their interrelationships: - Disposable income: The income available to an individual after accounting for taxes and other deductions. - Consumption: The purchase and use of goods or services by households or individuals. - Complementary good: A good consumed together with another good. When the demand for one good increases, the demand for the complementary good usually increases too. - Substitute good: A good that can serve as an alternative to another good, meeting the same needs or wants. When the demand for one good increases, the demand for a substitute good typically decreases. - Normal good: A good for which consumption increases when disposable income increases, holding all other factors constant. - Inferior good: A good where consumption decreases as disposable income increases, holding all other factors constant.

The given exercise states that during the recession, there was a 10% decrease in disposable income, which resulted in a 5% increase in consumption of a certain good. This is an important clue: if consumption increases despite a decrease in disposable income, the good must have a negative income elasticity. Now, let's consider each type of good and determine if they fit in this scenario.

A complementary good's consumption typically increases when the demand for another good increases. However, the exercise only provides information about disposable income and consumption; it doesn't provide enough information to evaluate complementary goods. Therefore, we cannot draw any conclusions about this option.

A substitute good usually sees a decrease in consumption when the demand for another good increases. The decrease in disposable income can indeed impact the demand for certain goods, making people switch to substitutes. However, the exercise doesn't provide information about other goods that could be substituted. Therefore, we cannot draw conclusions about this option either.

A normal good would generally see an increase in consumption as disposable income increases. Since this exercise observes a decrease in disposable income, it would suggest that this good is not a normal good, as consumption increased rather than decreased.

For inferior goods, consumption decreases as disposable income increases. This means that when disposable income decreases, an inferior good's consumption may increase. In the given exercise, a 5% increase in the good's consumption is observed when disposable income decreases, fitting the description of an inferior good. After analyzing the four options (a) complementary, (b) substitute, (c) normal good, and (d) inferior good, we can conclude that:

During the recession, the nation's disposable income fell by 10 percent, while its consumption of a certain good rose by 5 percent. Based on the analysis, it is most likely that the good in question is (d) an inferior good.