Suppose that the elasticity of demand for hamburgers is 2.5 and price decreases by 14%. By what percentage will quantity demanded for hamburgers increase?
A. 2.5%
B. 5.6%
C. 25%
D. 35%
Answer: D
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If the aggregate supply curve is horizontal, an increase in aggregate demand will
A) increase both real and nominal GDP by the full multiplier effect. B) increase nominal GDP but not real GDP. C) increase the price level but not real GDP. D) increase real GDP by less than the full multiplier effect because of rising prices.
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Whether an externality is positive or negative, it is always
A. evaluated by the impact on the third party. B. evaluated by the government. C. judged by the profitability of the firm producing the product. D. evaluated by the Supreme Court of the United States.
If the Fed carries out an open market operation and buys U.S. government securities, the federal funds rate ________ and the quantity of reserves ________
A) rises; increases B) falls; increases C) rises; decreases D) falls; decreases E) rises; does not change