When domestic prices rise,
A. business investment rises because interest rates fall.
B. exports rise.
C. the buying power of cash assets rises.
D. interest sensitive consumption falls because interest rates rise.
Answer: D
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The "investment" component of aggregate demand will include all of the following except
a. expenditures of business firms on new plants. b. expenditures of business firms on new equipment. c. resales of existing physical assets. d. household spending on new homes.
"Crowding-out" refers to the process by which
a. high consumption leads to low saving and investment. b. the Fed prevents "runs" on banks. c. Fed sales of bonds reduce the ability of corporations to buy bonds. d. increased government spending raises interest rates, thus lowering investment spending.
Gabriela recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Gabriela's income elasticity for groceries is
a. 0.33. b. 0.5. c. 1. d. 3.
Implicit costs are
A. costs that are taken into consideration by accountants. B. the opportunity costs of using factors that a producer does not buy or hire but already owns. C. the costs of using factors that a producer hires or rents. D. costs that are variable in the short run and fixed in the long run.