Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?
A) Demand is likely to be perfectly inelastic.
B) Demand is likely to be perfectly elastic.
C) Demand is likely to be relatively elastic.
D) Demand is likely to be relatively inelastic.
Answer: D
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The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
The government of Youland increased its spending by $100 billion. However, the corresponding change in output was much smaller than that predicted by the government expenditure multiplier. This occurs due to ________
A) crowding out B) a liquidity crisis C) the internalization of an externality D) quantitative easing
According to the liquidity premium theory of the term structure
A) because buyers of bonds may prefer bonds of one maturity over another, interest rates on bonds of different maturities do not move together over time. B) the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium. C) because of the positive term premium, the yield curve will not be observed to be downward sloping. D) the interest rate for each maturity bond is determined by supply and demand for that maturity bond.
Is the following a positive or normative statement? The unemployment rate in Nevada is higher than the unemployment rate in New York