When the consumer spends a large portion of her income on a good, demand will be
A) elastic.
B) unit-elastic.
C) inelastic.
D) elastic, unit-elastic or inelastic depending upon supply.
A
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Refer to Figure 16-1. Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from
A) A to E. B) A to B. C) B to A. D) B to C. E) C to B.
Which of the following is a long-term financial instrument?
A) a negotiable certificate of deposit B) a repurchase agreement C) a U.S. Treasury bond D) a U.S. Treasury bill
The following is an example of adverse selection
a. A majority of those applying for well paid jobs are under qualified b. More reckless drivers opt for cars with fewer safety devices c. Individuals living in less secure neighborhoods want to buy less insurance d. Individuals with a strong family history of heart diseases opt to buy less insurance
Monetarists and classical economists:
a. assume that stimulative monetary policy will create high levels of GDP without inflation. b. assume that stimulative monetary policy will create high levels of GDP and slightly high prices. c. assume the economy operates at full employment and stimulative monetary policy will only cause the price level to rise. d. assume that the economy operates at full employment and stimulative monetary policy will increase both aggregate supply and aggregate demand. e. assume that the Keynesian description of monetary policy underestimates the true stimulative effect of an increase in the money supply.