If the price of a product falls, that product becomes cheaper and people will want to purchase more of it in place of other goods. This statement best describes:
A) the income effect.
B) the substitution effect.
C) a complementary good.
D) an inferior good.
Ans: B) the substitution effect.
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Assume an equilibrium price of $7 and equilibrium quantity of 8 units at demand D and supply S2 in the graph shown. Total surplus is:
A. $32.
B. $12.
C. $56.
D. $16.
The English philosophers Jeremy Bentham and John Stuart Mill founded the school of thought called
a. liberalism. b. libertarianism. c. mobilism. d. utilitarianism.
Between 1980 and 2000, the national debt ______________.
A. stayed about the same B. approximately doubled C. approximately tripled D. increased over fivefold
When the Fed increases the money supply, interest rates
A. rise, causing velocity to fall. B. fall, causing velocity to fall. C. rise, causing velocity to rise. D. fall, causing velocity to rise.