If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:
a. that for every 1% increase in quantity, there will be a 6% increase in price.
b. that for every 1% increase in quantity, there will be a 6% decrease in price.
c. that for every 6% increase in quantity, there will be a 1% increase in price.
d. that for every 6% increase in quantity, there will be a 1% decrease in price.
b
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When the nominal interest rate rises, the quantity of money demanded decreases because
A) people will buy fewer goods and hence hold less money. B) the price level also rises and people decrease their demand for money. C) people shift funds from interest-bearing assets into money. D) people shift funds from money holdings to interest-bearing assets.
An example of a negative externality created in the market system would be
A) poverty. B) unemployment. C) an increased number of bird flu patients. D) water pollution.
A bowed production possibilities curve is consistent with
A) an unchanged opportunity cost. B) a technologically inefficient society. C) the underutilization of productive resources. D) highly specialized resources.
When Argentina fixed the exchange rate of their peso to the U.S. dollar, one outcome was:
A. Argentinean central bankers regained control of their domestic interest rate. B. Argentinean central bankers were finally able to focus their attention on domestic monetary policy. C. Argentineans began using the U.S. dollar for all of their transactions. D. Argentinean central bankers effectively gave control of their domestic interest rate to the FOMC.