Suppose the country that pegs its currency has an overvalued real exchange rate and that output is currently above the natural level of output. Which of the following will occur as the economy adjusts to this situation?
A) P will decrease over time until Y = Yn.
B) A reduction in the pegged value of the domestic currency will cause a leftward shift of the AD curve.
C) Net exports will increase as the economy adjusts to this situation.
D) Domestic goods will become less competitive as the economy adjusts by itself.
E) none of the above
D
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If a 10 percent price increase generates a 10 percent decrease in quantity demanded, then demand is
A) unit elastic. B) elastic. C) perfectly inelastic. D) perfectly elastic. E) inelastic.
Suppose the law of diminishing marginal utility holds for coffee. As a person drinks more coffee during the day, the total utility he or she receives will:
a. increase faster and faster. b. fall steadily. c. remain constant. d. rise, but at slower and slower rates.
The primary credit rate is
A. determined by Congress. B. determined directly by the Federal Reserve. C. determined by market forces alone, without Federal Reserve influence. D. determined by market forces but targeted by the Federal Reserve.
The price elasticity of demand is a measure of the:
A. Effect of changes in demand on the price B. Relationship between price and profitability C. Responsiveness of buyers of a good to changes in its price D. Sensitivity of a good's price to changes in demand