The demand for a good is elastic if
a. an increase in price leads to a decrease in total revenue
b. an increase in price leads to an increase in total revenue
c. an increase in price causes no change in total revenue
d. total revenue is maximum
e. total revenue is minimum
A
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Adam Smith’s diamond-water puzzle
A. can be resolved by distinguishing between marginal and total utility. B. occurs because diamonds have no utility. C. occurs because scarcity increases total utility. D. will likely never be resolved with existing economic tools.
Over the past decade, the incomes of the top 1 percent have increased disproportionately higher than that of the middle class. These changes mean that the Lorenz curve moved ________ the 45 degree line and the Gini ratio has ________
A) closer to; decreased B) closer to; increased C) further away from; decreased D) further away from; increased
Suppose real GDP is $800 billion when the MPC is 0.80, and people decide to increase their saving by $30 billion. Before this change, the economy was in equilibrium with people intending to save $100 billion and producers intending to invest $100 billion. The new equilibrium level of real GDP is:
a. $600 billion. b. $650 billion. c. $680 billion. d. $730 billion. e. $800 billion.
Refer to the graph shown. Expectations of inflation at point B are:
A. 1 percent. B. 2 percent. C. 3 percent. D. unknown.