We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than one. A one percent change in price therefore causes
A) exactly a one percent change in the quantity demanded.
B) a change of less than one percent in the quantity demanded.
C) a greater than one percent change in quantity demanded.
D) a change that cannot be determined based on one percent.
Answer: C
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This agency acts like an international lender of last resort to cope with financial instability
A) World Bank B) European Central Bank C) IMF D) International Bank for Reconstruction and Development
According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation ________ the Fed's inflation target or when real GDP ________ the Fed's output target
A) rises above; drops below B) drops below; drops below C) rises above; rises above D) drops below; rises above
In the rational expectations model
a. markets are perfectly competitive and in equilibrium. b. markets may not clear even if wages and prices are otherwise perfectly flexible. c. markets may temporarily be in disequilibrium. d. only anticipated changes in aggregate demand affect output.
Under a gold standard, a balance of payments deficit automatically
a. raised interest rates. b. decreased exports. c. increased domestic prices. d. increased imports.