When two goods are substitutes for each other, the cross price elasticity of demand
A) will be negative.
B) will be zero.
C) may be either positive or negative.
D) will be positive.
Answer: D
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When there is a shortage of dollars in the foreign exchange market, the
A) U.S. exchange rate will appreciate. B) supply curve of dollars shifts rightward to restore the equilibrium. C) demand curve for dollars shifts leftward to restore the equilibrium. D) U.S. exchange rate will depreciate. E) supply curve of dollars shifts leftward to restore the equilibrium.
Suppose in the market for used cars, buyers would be willing to pay $9,000 for a car in good condition, while buyers would have to incur a cost of $3,500 to repair a car in poor condition. If the probability of a car being in bad condition is 0.35, what price would a risk-neutral buyer be willing to pay?
a. $3,925 b. $1,925 c. $7,775 d. $5,850
Suppose that an expansionary gap of $500 billion exists in the economy, and the marginal propensity to consume is 0.8 . Which of the following correctly describes a discretionary fiscal policy that will be just sufficient to close this expansionary gap?
a. Increase government spending by $250 billion. b. Increase taxes by $125 billion. c. Decrease government spending by $250 billion. d. Decrease taxes by $125 billion.
Which of the following is true?
A. The bible for the classical economists was Adam Smith's The Wealth of Nations. B. Keynes believed that the problem during recessions was inadequate aggregate demand. C. Say's law states that supply creates its own demand. D. All of the statements are true.