When the price of a normal good decreases, the substitution effect causes the quantity demanded to increase. When the price of an inferior good decreases, the substitution effect causes the quantity demanded to decrease.
a. true
b. false
b. false
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Which of the following is not an example of a fungible commodity?
A. Wheat B. Electricity C. Money D. All of these are fungible commodities.
If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap
a. True b. False Indicate whether the statement is true or false
Economic models
a. are constructed to mirror reality as closely as possible, and in this respect economic models are no different from other scientific models. b. are constructed to mirror reality as closely as possible, and in this respect economic models are very different from other scientific models. c. are simplifications of reality, and in this respect economic models are no different from other scientific models. d. are simplifications of reality, and in this respect economic models are very different from other scientific models.
Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that:
A. the terms of trade will be 3X equals 1Y. B. Alpha should specialize in Y and Beta in X. C. Alpha should specialize in X and Beta in Y. D. there is no basis for mutually beneficial specialization and trade.