If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by
A) 45 percent.
B) 20 percent.
C) 5 percent.
D) 10 percent.
Ans: A) 45 percent.
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Refer to Figure 5-1. At the market equilibrium,
A) the marginal cost is less than the marginal benefit. B) the marginal cost is equal to the marginal benefit. C) the marginal cost is greater than the marginal benefit. D) the marginal cost is zero.
A speculator who believes strongly that interest rates will fall would be likely to
A) buy futures contracts on Treasury bills. B) sell futures contracts on Treasury bills. C) sell Treasury bonds in the spot market. D) decrease now the amount of money which he lends.
Why do consumers benefit from pay-as-you-go social security?
A) It keeps inflation in check as money is redistributed. B) It is a better way than taxes to finance the government. C) It forces people to save more than they would otherwise. D) With sufficiently high population growth, many young contribute to the benefits of the old.
The equation for the tax multiplier is
a. 1 b. MPS/(1 - MPC) c. (1 - MPC)/MPC d. (1 - MPC)/MPC e. MPC/(1 - MPC)