To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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If average annual tuition at public 4-year colleges was $1,908 in 1990, when the CPI was 130.7, and $8,655 in 2012 when the CPI was 229.6, then the real cost of annual tuition
A) rose by 354 percent during that period. B) fell by 158 percent during that period. C) fell by 354 percent during that period. D) rose by 75.7 percent during that period. E) rose by 158 percent during that period.
Suppose a whiskey maker advertises its whiskey as follows: "Whiskey that tastes expensive and is expensive." The manufacturer is assuming some customers who buy whiskey
A) have a perfectly inelastic demand for whiskey. B) have a relatively inelastic demand for whiskey. C) want to impress their friends or associates. D) will ignore the law of demand. E) will purchase more at higher than at lower prices.
Assume you are lending money to a friend for a year and want to earn real interest of 5 percent on the loan. If you believe the inflation rate the next year will be 3 percent, you should charge your friend a nominal interest rate of
a. 5 percent b. 8 percent c. 3 percent d. 15 percent e. whatever he will pay
Which statement is true?
A. A perfectly elastic demand curve has an elasticity of zero. B. Elasticity measures the change in quantity demanded in response to a change in price. C. Elasticity of demand is found by dividing the percentage change in price by the percentage change in quantity. D. None of these statements are true.