What is the difference between an autonomous change in spending and an induced change in spending?
What will be an ideal response?
An autonomous expenditure is expenditure that does not depend on the level of GDP. A decline in income (due to a decline in GDP) leads to an induced decline in consumption.
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Suppose Alexander is successful in establishing a profitable market for his vegan bakery in what is a monopolistically competitive industry. In the long run, Alexander will most likely find it ________ to remain profitable as he faces ________ competition in the vegan bakery market.
A) easier; more B) harder; more C) easier; less D) harder; less
Assume that due to unfavorable conditions in a prime honey-producing area, the price of honey increases by 50 percent. The quantity consumed of herbal tea declines immediately by 25 percent. Everything else held constant, the:
a. cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are substitutes. b. cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are complements. c. cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are substitutes. d. cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are complements. e. cross-price elasticity of demand cannot be determined from the information provided.
All of the following are associated with a fixed exchange rate policy except:
A. sacrificing control of the domestic inflation rate. B. it means importing monetary policy. C. the need to maintain ample international reserves. D. higher import prices.
Serena deposits $125,000 at Bank of the Pacific, which has a required reserve ratio of 9 percent. What is the bank’s money multiplier and how much money could potentially be created from Serena’s deposit?
a. 9; $11,250 b. 11.11; $1,388,750 c. 9; $1,125,000 d. 1.11; $138,750