Suppose the price elasticity of demand for good A is 1.25 . If the price of good A increases by 20%, what will be the resulting percentage change in quantity demanded for good A?
Quantity demanded will fall by 25%.
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A society that is inside its production possibilities frontier is efficient.
Answer the following statement true (T) or false (F)
Why didn't the surge in the monetary base between 2008-2012 lead to a similar surge in the money supply?
A) The currency-deposit ratio rose significantly, resulting in a much smaller money multiplier. B) The excess reserve-deposit ratio rose significantly, resulting in a much smaller money multiplier. C) The Fed increase the required reserve ratio, resulting in a much smaller money multiplier. D) Nonborrowed reserves declined, offsetting the increase in the monetary base.
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
When the Fed raises the target for federal funds, it
A) sells government bonds. B) increases the discount rate. C) buys government bonds. D) increases the required reserve ratio.