If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded, then the price elasticity of demand is 0.50
a. True
b. False
B
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In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, an increase in the reserve requirement ________ the demand for reserves, ________ the federal funds rate, everything
else held constant. A) decreases; lowering B) increases; lowering C) increases; raising D) decreases; raising
Monetary & Fiscal policy
What will be an ideal response?
The Scarcity Principle applies to:
A. only market decisions, e.g., buying a car. B. only the poor. C. only non-market decisions, e.g., watching a sunset. D. all decisions.
Suppose that the federal government had a budget deficit of $100 billion in year 1 and $90 billion in year 2, but that it experiences budget surpluses of $40 billion in year 3 and $30 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have
A. decreased by $120 billion. B. increased by $120 billion. C. increased by $260 billion. D. decreased by $260 billion.