If the price elasticity of demand coefficient equals 2, this means a 10 percent increase in price will result in a 20 percent decrease in the quantity demanded
a. True
b. False
Indicate whether the statement is true or false
True
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? In Figure 5-16, a decrease in the price of apples will
A. shift Adam’s budget constraint out. B. make Adam’s budget constraint steeper. C. shift Adam’s indifference curves out. D. make Adam’s budget constraint flatter.
According to the government budget constraint, any excess of public expenditures and transfers over taxes and user fees must be funded by
A) private borrowing. B) government borrowing. C) U.S. Treasury money creation. D) Federal Reserve money creation.
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and net nonreserve international borrowing/investing in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more positive (or less negative). b. The real risk-free interest rate falls and net nonreserve international borrowing/investing becomes more negative (or less positive). c. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more negative (or less positive). d. The real risk-free interest rate and net nonreserve international borrowing/investing remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Land and capital are substitutes. If rent goes up and the amount of capital used goes up, we can assume that the
A. output effect outweighed the substitution effect. B. the substitution effect outweighed the output effect. C. the substitution effect and the output effect canceled each other out. D. there is no way to determine the relative weights of the substitution effect and the output effect.