If the price of a good rises by 10% and the percentage increase in the total amount consumers spend on the good is 10%, then the good is
A. elastic.
B. perfectly inelastic.
C. inelastic.
D. unit elastic.
Answer: C
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The substitution effect occurs because when the price of one good increases, consumers will buy fewer substitute goods
a. True b. False Indicate whether the statement is true or false
You are a hotel manager and you are considering four projects that yield different payoffs, depending upon whether there is an economic boom or a recession. The potential payoffs and corresponding payoffs are summarized in the following table. ProjectBoom (50%)Recession (50%)A$20-$10B-$10$20C$30-$30D$50$50A risk-neutral manager will prefer project:
A. A. B. B. C. C. D. D.
A fixed exchange rate, say, Mexican pesos per dollar, is determined by
a. U.S. consumers that buy Mexican exports b. the U.S. government c. U.S. businesses that export to Mexico d. the foreign exchange market e. the levels at which other exchange rates float
The concept of "lender of last resort" is that when
a. lending decreases, the Fed will be the last to resort to higher interest rates. b. borrowing increases, the Fed will be the last to increase lending. c. commercial banks are hesitant to lend, the Fed will step in and increase reserves. d. a borrower has tried everyone else, the Fed will lend directly to them.