If demand is inelastic and the price of a product decreases by 100 percent, then
A. the change in quantity demanded is equal to 100 percent.
B. the change in quantity demanded is greater than 100 percent.
C. the decrease in quantity demanded is greater than 0 percent.
D. the change in quantity demanded is less than 100 percent.
Answer: D
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The IS—LM model predicts that a temporary beneficial supply shock
A) increases output, national saving, and investment, but not the real interest rate. B) increases output, national saving, and the real interest rate, but not investment. C) increases the real interest rate, investment, and output, but not national saving. D) increases output, national saving, investment, and the real interest rate.
Foreign exchange market intervention is most effective when:
a. each country's political leaders agree to cooperate fully with the process. b. leading economists in each country concur that intervention is needed. c. permanent differences between the free market exchange rate and the fixed exchange rate are expected. d. temporary differences between the free market exchange rate and the fixed exchange rate are expected. e. all the countries restrict the international movement of goods and services.
The rational expectations school of thought argues that people form expectations based on:
a. all available information. b. only on information they believe to be "insider" information. c. their own instincts. d. only past information and experience.
A problem that often occurs when a public good is provided by private firms is