Refer to the above figure. Line ACE is called
A) the consumption function. B) the saving function.
C) the savings function. D) the 45-degree line.
D
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Duke increased his spending on steak from $7 to $11 per week because of a 12 percent salary increase, so his
A) income elasticity of demand for steak is 1.37. B) price elasticity of demand for steak is 1.37. C) income elasticity of demand for steak is 3.7. D) price elasticity of demand for steak is 3.7.
In a price system, changes in prices
A) make it difficult for the system to function well. B) imply that people have made mistakes in the past. C) signal to everyone in the system what goods are relatively more or less scarce. D) signal to policy makers what goods should and should not be taxed more.
Equal increases in government spending and taxes will:
a. cancel each other out so that the equilibrium level of real GDP will remain unchanged. b. lead to an equal decrease in the equilibrium level of real GDP. c. lead to an equal increase in the equilibrium level of real GDP. d. lead to an increase in the equilibrium level of real GDP real GDP that is larger than the initial change in government spending and taxes. e. lead to an increase in the equilibrium level of output that is smaller than the initial change in government spending and taxes.
Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is
a. $50. b. $500. c. $50,000. d. This cannot be determined from the information given.