A positive cross-elasticity of demand between two goods indicates that the two goods are both normal goods.
a. true
b. false
Answer: b. false
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When the economy suffers a temporary negative supply shock, the central bank's autonomous monetary policy to keep inflation at the target inflation rate leads to
A) more stable economic activities. B) a large deviation of output from its potential. C) divine coincidence. D) both B and C.
Everything else held constant, if a factor increases the demand for ________ goods relative to ________ goods, the domestic currency will appreciate
A) foreign; domestic B) foreign; foreign C) domestic; domestic D) domestic; foreign
A government that uses a bureau rather than a private firm to provide some good or service
a. may have less opportunity for officials and legislators to reward friends and supporters with jobs b. will always incur higher costs of production c. will lose the ability to make decisions via the hierarchy of the market d. may be better able to control details of production e. will not be able to sell the good or service after it is produced
The government wants to improve the irrigation system for farmers by setting up wells. The farmers, in return, would have to pay a sum of $100 each. Many farmers are aware that even if they do not pay, other farmers will pay for it and the required sum of money would easily be collected. This problem can be avoided by: a. taking the help of the law
b. forming an association and putting social pressure to make sure all the farmers pay. c. imposing an extra tax on the farmers who do not pay for the irrigation system. d. preventing all the farmers from using the well.