In the above figure, if aggregate demand does not change, the long-run equilibrium will be at the price level of ________ and real GDP of ________
A) 100; $15.5 trillion
B) 120; $16 trillion
C) 100; $16 trillion
D) 110; $15.5 trillion
C
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Suppose the demand curve for bus travel is downward sloping, and the income elasticity of demand for bus travel is negative.
(i) Design an indifference curve-budget line diagram showing the substitution and income effects created when the price of bus travel falls. In your diagram, place bus travel on the horizontal axis and all other goods on the vertical axis. (ii) How you can tell from your diagram that the income elasticity of demand for bus travel is negative? Explain.
An increase in the U.S. demand for the Mexican peso
A) causes an increase in the U.S. dollar price of a Mexican peso. B) causes the Mexican peso to appreciate. C) causes the U.S. dollar to depreciate. D) causes Mexican goods to be relatively more expensive. E) All of the above.
One of the practical issues in the choice of government spending or taxes to change aggregate demand is how large a
a. change in demand we want. b. trade deficit we want. c. budget deficit we want. d. government sector we want.
When the exchange rate for a currency rises so that the currency trades for more of other currencies, it is said to be depreciating
a. True b. False Indicate whether the statement is true or false