The demand for food (a broad group) is more:
A. sensitive to price changes than the demand for beef.
B. elastic than the demand for beef (specific commodity).
C. inelastic than the demand for beef (specific commodity).
D. responsive to price changes than the demand for beef.
Answer: C
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Well-functioning financial markets
A) cause inflation. B) eliminate the need for indirect finance. C) cause financial crises. D) allow the economy to operate more efficiently.
Diseconomies of scale arise primarily because:
A. the short-run average total cost curve rises when marginal product is increasing. B. of the difficulties involved in managing and coordinating a large business enterprise. C. firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available. D. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital).
Monetary stimulus may be ineffective if
A. People usually respond to lower interest rates by consuming more goods and services. B. The investment demand curve is inelastic. C. Expectations of a boom cause the investment demand curve to shift to the right, offsetting interest rate effects that would stimulate the economy. D. The investment demand curve is horizontal.