Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:
A. electricity is a luxury good.
B. electricity is sold in a monopoly market.
C. the fraction of income spent on electricity is large.
D. few substitutes for electricity exist.
Answer: D
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If the current account balance is negative, net interest is $100 billion and net transfer is -$100 billion, then
A) exports exceed imports. B) imports exceed exports. C) the official settlements account must be positive. D) real GDP exceeds potential GDP. E) the official settlements account must be negative.
In a democratic society, the preferences of __________ will often dominate decisions made by direct majority voting
a. elected government representatives b. special interest groups c. rent seekers d. senior citizens e. the median voter
If a transaction in the balance of payments of Country A enters the foreign exchange market, then it is fair to say that:
a. Sources of funds in Country A's balance of payments are supplies of Country A's currency. b. Sources of funds in Country A's balance of payments are demands for Country A's currency. c. Uses of funds in Country A's balance of payments are demands for Country A's currency. d. Transactions in Country A's balance of payments have no counterpart in the foreign exchange market.
Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
a. water or diamonds b. insulin or nasal decongestant spray c. food in general or breakfast cereal d. gasoline over the course of a week or gasoline over the course of a year e. personal computers or IBM personal computers