If the Price Elasticity of Demand is unit elastic, then a fall in price:
a) Reduces revenue.
b) Leaves revenue unchanged.
c) Increases revenue.
d) Reduces costs.
Answer: b) Leaves revenue unchanged.
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A technological advance that increases labor productivity will:
a. decrease the supply of labor as fewer workers are needed. b. increase the demand for labor as MP rises. c. decrease the demand for labor as fewer workers are needed. d. lower wages.
Answer the following questions true (T) or false (F)
1. The relationship between GDP and the money supply has gotten stronger since the 1980s. 2. The Fed has adopted an interest rate target for most of the time since World War II. 3. Inflation targeting allows monetary policy to focus on inflation and inflation forecasts except during times of severe recession.
According to the research of Christina Romer and David Romer:
A. a tax reduction of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent. B. a tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent. C. a tax reduction of 2 to 3 percent raises real GDP by roughly 1 percent. D. a tax increase of 2 to 3 percent lowers real GDP by roughly 1 percent.
An increase in the productivity of a factor of production will
A. cause a firm to move down the marginal revenue product curve. B. shift its marginal revenue product curve to the right. C. cause a firm to move up the marginal revenue product curve. D. shift its marginal revenue product curve to the left.