If each 10 percent increase in the price of gasoline reduces by 2 percent the quantity purchased, the price elasticity of demand for gasoline is
A) .2.
B) 5.
C) 8.
D) 12.
E) 20.
A
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Developing countries are damaged by dead capital because
A) it replaces too many workers, creating unemployment. B) resulting inefficiencies greatly reduce the rate of return on investment. C) it must be sold as scrap. D) none of the above.
The nominal interest rate: a. varies directly with the rate of expected inflation in an economy
b. is the interest rate expressed in dollars of constant purchasing power. c. equals the difference between the real interest rate and the inflation rate. d. is the basis for decisions taken by the lenders and the borrowers in an economy. e. is the percentage increase in the average price level from one year to the next.
If a budget deficit increases interest rates, it is possible that investment will
a. fall, leading to a larger capital stock. b. fall, so that there is a smaller capital stock. c. rise, because investment is directly related to interest rates. d. rise, because investment is more attractive when interest rates are higher.