Income elasticity of demand is defined as
A) the change in income divided by the change in quantity.
B) the change in price divided by the change in income.
C) the percentage change in demand divided by the percentage change in income.
D) the change in income multiplied by the change in quantity.
Answer: C
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International free trade always hurts the nations that run deficits, and benefits the nations that run surpluses
Indicate whether the statement is true or false
The use of surveys of experts to estimate long-run production costs may be undermined by the fact that:
A) it is a time-consuming process. B) it is dependent on the judgments of individuals closely connected with the industry. C) reporting biases can occur. D) all of the above.
Would you expect a shift in supply to have a greater effect on equilibrium quantity in the short run or in the long run? Explain your answer.
A. A greater effect on equilibrium quantity in the long run because the longer the time period, the more elastic is the good's demand. B. The same effect on equilibrium quantity in the short run and the long run because when analyzing one good, it is predicted that elasticity does not change. C. A greater effect on equilibrium quantity in the short run because elasticity is higher the shorter the time period. This would lead consumers to adjust their quantity greatly. D. A greater effect on equilibrium quantity in the long run because the longer the time period, the greater the increase in income and thus demand. References
In the traditional Keynesian model, an increase in taxes leads to all of the following EXCEPT
A. an increase price level. B. a decrease in consumption. C. a decrease in aggregate demand. D. lower real GDP.