A 2 percent increase in income increases the quantity demanded of a good by 1 percent. The income elasticity of demand for this good is _______. The good is a _______ good
A. 2; normal
B. –2; inferior
C. 1/2; normal
D. 2; inferior
C The income elasticity of demand equals (1 percent) ÷ (2 per-cent); it is positive so the good is a normal good.
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Total government expenditure as a percentage of GDP is lower in the United States than in Sweden
a. True b. False
When the price of peaches changes, the demand curve for peaches
a. shifts because the price of peaches is measured on the vertical axis of the graph. b. shifts because the quantity demanded of peaches is measured on the horizontal axis of the graph. c. does not shift because the price of peaches is measured on the vertical axis of the graph. d. does not shift because the price of peaches is measured on the horizontal axis of the graph.
An individual who suffers from money illusion will
A. feel that the same percentage increase in prices and income improves his economic position. B. concentrate on relative prices. C. only be concerned about the prices of a few goods. D. never be fooled by the impact of price changes on the purchasing power of income.
In the 1990s:
A. direct private investment to the DVCs increased and government-provided foreign aid decreased. B. both direct private investment and government-provided foreign aid to the DVCs increased. C. both direct private investment and government-provided foreign aid to the DVCs decreased. D. direct private investment to the DVCs decreased and government-provided foreign aid increased.