If elasticity of demand is 0.1, a 1% increase in price will lower quantity demanded by
A. 0.01%.
B. 0.1%.
C. 1.0%.
D. 10%.
E. 100%.
B. 0.1%.
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The value of every monetary transaction in the economy would be included in
a. GDP. b. potential GDP. c. personal income. d. national income. e. None of the above.
Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
a. confused association and causation. b. misunderstood the Ceteris paribus assumption. c. used normative economics to answer a positive question. d. built an untestable model.
If Ms. Anniston transfers $1,000 from her checking account to her money market account, then
A. M1 falls and M2 remains the same. B. M1 falls and M2 rises. C. both M1 and M2 rise. D. M1 remains the same and M2 rises.
If marginal cost is greater than marginal revenue
A. the firm should expand output. B. the firm should contract output. C. the firm should hold output constant. D. there is no way to determine if the firm should expand output, contract output, or hold output constant.