Which of the following causes demand to be more elastic with respect to price?
A. Shorter periods of time to adjust to a change in price.
B. A higher ratio of price to income.
C. Fewer substitutes.
D. A steeper demand curve for a given price and quantity.
Answer: B. A higher ratio of price to income.
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Which of the following policies improves prospects for more rapid economic growth?
A) policies to increase government expenditure B) limitations on international trade C) policies to increase the educational attainment of the labor force D) encouragement of political instability
In the Keynesian model, an increase in government spending increases
A) the money supply by an equal amount. B) the money supply by a multiple amount. C) aggregate demand by an equal amount. D) aggregate demand by a multiple amount.
If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?
A) The nominal rate of interest in the United States would be greater than the nominal interest rate in the United Kingdom. B) The difference between the U.K. and U.S. interest rates is a function of the difference between their inflation rates. C) The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity. D) Investors would get a higher return on their money in the United States.
In the long run, a year-long drought that destroys most of the summer's wheat crops causes permanently:
A. higher prices. B. lower prices. C. lower output. D. None of these is true.