If the price elasticity of demand for a good is -0.8 and quantity demanded decreases by 40%, price must have
A. decreased by 20%.
B. increased by 32%.
C. increased by 5%.
D. decreased by 32%.
E. none of the above
Answer: E
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Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $10, we would expect that
A) price will increase until quantity demanded equals quantity supplied. B) demand will decrease until quantity demanded equals quantity supplied. C) supply will increase until quantity demanded equals quantity supplied. D) there will be no change in the price since the market is in equilibrium.
The increase in government spending on unemployment insurance payments to workers who lost their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion are examples of
A) discretionary fiscal policy. B) discretionary monetary policy. C) automatic stabilizers. D) automatic monetary policy.
In general, the demand for a product is more elastic in the long run than in the short run.
Answer the following statement true (T) or false (F)
High-powered money consists of
A. all deposits at the Fed. B. bank reserves minus vault cash. C. bank reserves plus currency held by the nonbank public. D. deposits at the Fed plus vault cash.