Suppose the own price elasticity of demand for good X is ?0.25, and the quantity of good X increases by 5 percent. What would you expect to happen to the total expenditures on good X?
A. Remain unchanged
B. Decrease
C. Increase
D. Neither increase, decrease nor remain unchanged
Answer: B
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When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate, we say there is
A) relative purchasing power parity. B) purchasing power parity. C) a Phillips curve. D) an aggregate supply shock.
Which of the following might be an example of an economic argument against advertising?
a. It causes the demand for the good to be more elastic b. It allows the producer to earn an economic profit in the long run c. People may be deluded into thinking that a good with a brand name is better than an otherwise identical generic brand d. The claims made in the ads are almost always false
We might predict that Hawaii has a comparative advantage compared to Russia in the production of pineapples because Hawaii has:
A. a climate more suitable for pineapples. B. more advanced farming technology. C. more land available to grow them on. D. less governmental oversight in the pineapple industry.
In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant, the inflation rate equals
A. the real interest rate. B. the nominal interest rate. C. the level of real seignorage revenue. D. the growth rate of the nominal money supply.