The price elasticity of demand measures the responsiveness of changes in price to the quantity demanded.
Answer the following statement true (T) or false (F)
False
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Suppose there is an increase in the money supply, but that people's demand for money balances increases by a greater amount at the same time. The net effect would be
A) lower interest rates, greater real GDP, and a higher price level as aggregate demand increases because of the indirect effect of the increase in the money supply. B) no change in aggregate demand or aggregate supply. C) a lower price level in the long run. D) an increase in aggregate demand due to the increase in the money supply, but a decrease in aggregate supply due to the increase in the demand for money.
Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that
A) the demand for tarot card readers has increased. B) the law of demand has been violated. C) the number of tarot card readers has increased. D) tarot card readers are deliberately charging high prices because they provide services for superstitious clients.
If the nominal interest rate is 3% and the inflation rate is 6%, the real interest rate is
a. 2% b. 3% c. -3% d. 9%
Many economists thought the Fed should have lowered the federal funds rate less aggressively in late 2007 and throughout 2008
a. True b. False