During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever
If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for travelling by car. A) If travelling by car is a normal good, the substitution effect would cause an increase and the income effect would cause a decrease in travelling by car.
B) If travelling by car is a normal good, both the substitution and income effects would be cause an increase in travelling by car.
C) If travelling by car is a normal good, the substitution effect would cause a decrease and the income effect would cause an increase in travelling by car.
D) If travelling by car is a normal good, both the substitution and income effects would cause a decrease in travelling by car.
B
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Refer to Table 2.3. Assume that 2010 is the base year. Real GDP in 2007 is
A) $490.00. B) $568.00. C) $580.00. D) $671.00.
According to the Keynesian view of aggregate supply, an increase in the money supply will:
A. Always cause inflation. B. Cause inflation if the economy is at full employment. C. Cause inflation only if aggregate supply is horizontal. D. Never cause inflation.
Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to decrease:
A. the long-run effect would be a lower price level. B. output in the economy would increase. C. prices in the economy would increase. D. the short-run aggregate supply curve would shift left.
Government expenditures as a share of the U.S. economy are:
A. the largest in the world. B. the smallest in the world. C. smaller than most Western European countries. D. larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy.