Water is considered a necessity. So, is the demand for water elastic or inelastic?
What will be an ideal response?
The demand for necessities is inelastic, so the demand for water is inelastic.
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Suppose the economy is operating below potential output. If policy makers try to avoid a budget deficit by raising taxes or reducing government spending, these actions would
A) make a recession worse. B) increase inflation. C) negate the multiplier effect. D) help pull an economy out of a depression.
If a currency is allowed to move freely until it violates economic fundamentals, that currency is said to have
A) a managed float. B) a free floating system. C) a currency board. D) a stable basket.
Which type of integration requires adapting domestic policies to coordinate with those of trading partners?
What will be an ideal response?
A country that dollarizes
A) maximizes its seignorage. B) earns the same amount of seignorage as it would with a currency board. C) earns the same amount of seignorage as it would with exchange-rate targeting. D) eliminates its seignorage. E) must pay seignorage to other governments to use their currency.