The income effect of a price increase for a Giffen good outweighs the substitution effect
Indicate whether the statement is true or false
TRUE
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Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the point price elasticity of demand equals
A) -1.5. B) -0.67. C) -4. D) -2.5.
In most developed economies, public spending on national defense
a) is the largest component of the government’s budget b) accounts for about 1/3 of GDP c) is less than spending on transfer payments d) cannot be distinguished from infrastructure expenditures in the national accounts e) is financed by a national system of subscriptions
Use the above figure. Which graph depicts an inferior good?
A. A B. B C. C D. D
In the long run, an increase in government purchases of military equipment would cause output to ________ and the aggregate price level to ________.
A. fall; stay constant B. fall; fall C. stay constant; fall D. stay constant; rise