Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
A. negative and therefore X is an inferior good.
B. negative and therefore X is a normal good.
C. positive and therefore X is an inferior good.
D. positive and therefore X is a normal good.
Answer: D
You might also like to view...
All else constant, an increase in the amount of government spending on roads and bridges would cause GDP in the domestic economy to increase
Indicate whether the statement is true or false
Subprime lending gained popularity because of all of the following, except:
A. investing in a home was seen as the safest investment one could make. B. helping poor to own a home. C. the value of homes had not fallen for over 60 years. D. it was meant to encourage those with risky credit to make a safe investment.
Central banks often find:
A. they must keep their goals secret or else they cannot be attained. B. there are tradeoffs that make pursuing all of their goals simultaneously impossible. C. the goal(s) they pursue will be determined by their profitability. D. they can efficiently pursue all of their goals simultaneously.
Explain how each of the following events would affect the short-run aggregate supply curve
a. A decrease in the price level b. A decrease in what the price level is expected to be in the future c. A price level that is currently lower than expected d. An unexpected decrease in the price of an important raw material e. A decrease in the labor force