"When the price level increases, aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer
What will be an ideal response?
The statement is incorrect. An increase in the price level decreases aggregate planned expenditure because the purchasing power of money falls, the real interest rises, and the price of imports become less expensive relative to domestically produced goods. Because aggregate planned expenditure decreases, equilibrium expenditure decreases.
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One important role for government as referee is in defining and enforcing property rights.
Answer the following statement true (T) or false (F)
Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles
These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that A) people are rational. B) people respond to economic incentives. C) optimal decisions are made at the margin. D) equity is more important than efficiency.
________ countries tend to depend on tariffs for a relatively large part of their government revenue
A) Developed B) Developing C) All
For a rational consumer, the income elasticity of demand for common salt is: a. greater than one. b. smaller than one. c. equal to one
d. equal to zero.