The income elasticity of demand for an inferior good could be
A. negative.
B. zero.
C. positive.
D. any one of these depending on the other factors involved.
Answer: A
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When comparing tax and spending policy by the government, in general we note that the tax policy multiplier effect relative to the spending multiplier should be:
A. larger. B. smaller. C. equivalent. D. not comparable.
A country that suffers from bouts of high inflation and wants to fix its exchange rate should tie its currency to the currency of a:
A. larger country. B. country with similar inflation performance. C. country that is still on the gold standard. D. country with a strong reputation for low inflation.
A worldwide recession reduces the amount of U.S. exports, and as a result, aggregate demand decreases. To move U.S. GDP back to potential GDP, the Fed should
What will be an ideal response?
Imports ________ consumer surplus, ________ producer surplus, and ________ total surplus
A) decrease; decrease; decrease B) increase; increase; increase C) increase; decrease; decrease D) increase; decrease; increase E) decrease; increase; increase