Which of the following best represents the law of demand?
A. As the price of a good decreases, the quantity demanded of that good decreases.
B. As the price of a good decreases, the demand curve for that good shifts to the right.
C. As the price of a good decreases, the quantity demanded of that good increases.
D. As the demand for a good increases, the price of that good increases.
Answer: C
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Assume the government reduces government spending. What is the first round effect on the components of the balance of payments (assume low international capital mobility and fixed exchange rates; also assume that before the government action all the components were 0)? a. Current international transactions balance and reserves account become positive; net nonreserve international
borrowing/lending balance becomes negative. b. Current international transactions balance becomes positive; net nonreserve international borrowing/lending balance and reserves account become negative. c. Net nonreserve international borrowing/lending balance becomes positive; current international transactions balance and reserves account becomes negative. d. Net nonreserve international borrowing/lending balance and reserves account become positive; current international transactions balance becomes negative. e. Reserves account becomes positive; current international transactions balance and net nonreserve international borrowing/lending balance become negative.
When the price of an inferior good increases,
a. both the income and substitution effects encourage the consumer to purchase more of the good. b. both the income and substitution effects encourage the consumer to purchase less of the good. c. the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. d. the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.
Political instability is an impediment to development mainly because it:
A. undermines both domestic and foreign investment in a developing country. B. creates cultural and social differences among groups in developing countries. C. produces excessive levels of domestic saving. D. redistributes income.
Use a figure to study the following question: Imagine that the economy is at a point on the DD-AA schedule that is above both AA and DD, where both the output and asset markets are out of equilibrium. Explain what will happen next
What will be an ideal response?