When the price level falls,
A. real income rises.
B. real income falls.
C. real GDP demanded increases.
D. real GDP demanded decreases.
Answer: C
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A decline in the yields earned by bonds should:
A. increase the demand for money. B. also decrease the demand for money. C. not impact the demand for money since money doesn't earn any interest. D. increase the velocity of money.
The point on the production possibilities curve at which an economy will operate is determined by:
A) which point produces the greatest amount of both goods. B) the demands of consumers. C) the absolute prices of the two goods. D) which point requires the fewest resources.
If your real disposable income goes up by $200 per week, and your real consumption spending goes up by $160 per week, you have an marginal propensity to save of
A. 1.2. B. 0.8. C. 0.2. D. 1.0.
"The price of compact fluorescent light bulbs fell because of improvements in production technology. As a result, the demand for incandescent light bulbs decreased. This caused the price of incandescent light bulbs to fall; as the price of incandescent
light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement. A) The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease. B) The statement is false because the demand for incandescent light bulbs would increase as the price of compact fluorescent light bulbs fell. C) The statement is false because compact fluorescent light bulbs producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits. D) The statement is false because it confuses the law of demand with the law of supply.