If the economy is at full employment:
A. the aggregate demand curve cannot shift to the right.
B. government spending causes crowding in.
C. Keynesians argue that any crowding-out effect is small.
D. crowding out is complete.
Answer: D
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Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes
or complements?
A decrease in the real exchange rate will tend to ________ exports and to ________ imports.
A. increase; decrease B. decrease; decrease C. decrease; increase D. increase; increase
Even though mass transit systems such as buses are available in most cities in the United States, many residents decide to drive to work in their own vehicles because
A. there is no opportunity cost of them to drive. B. they are not rational. C. the opportunity cost of riding a bus is too high for them. D. they do not behave according to the economic way of thinking.
Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if
a. prices in the U.S. were higher, or the number of euro the dollar purchased were higher. b. prices in the U.S. were higher, or the number of euro the dollar purchased were lower. c. prices in the U.S. were lower, or the number of euro the dollar purchased were higher. d. prices in the U.S. were lower, or the number of euro the dollar purchased were lower.