Elasticity computations related to demand carry a minus sign to show that the demand curve is negatively sloped
a. True
b. False
Indicate whether the statement is true or false
False
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The accelerator theory states that
A) the larger this period's desired capital stock the smaller will be this period's net investment. B) the larger the previous period's desired capital stock the larger will be this period's net investment. C) the larger the previous period's desired capital stock the smaller will be this period's net investment. D) this period's net investment is unrelated to this period's desired capital stock.
Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and GDP Price Index rises. b. The real risk-free interest rate falls, and GDP Price Index falls. c. The real risk-free interest rate rises, and GDP Price Index falls. d. The real risk-free interest rate and GDP Price Index remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Under new Keynesian theory, a correctly anticipated decrease in aggregate demand will lead to __________ in Real GDP and __________ in the price level
A) a decrease; a decrease B) no change; an increase C) no change; no change D) an increase; an increase E) an increase; no change
You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over
the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How would you respond to Surya? A) Surya is right; she has evidence to back her claim. The theory must be erroneous. B) Surya is making the mistake of assuming that correlation implies causation. C) I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices. D) I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.