Availability of Substitutes
What will be an ideal response?
If there are few substitutes for a good, then even when its price rises greatly, you might still buy it.
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If the Fed decides to use an open market operation to reduce the money supply by $1 million, and if the money multiplier is 10, then what total amount of Treasury securities must the Fed initially sell?
a. $10,000,000. b. $1,000,000. c. $100,000. d. $10,000.
The largest volume of trade in the world occurs between the United States and
a. Russia b. Japan c. Mexico d. Canada e. Britain
The inputs used to produce cupcakes (e.g., flour, sugar, butter, and labor) are also used to produce cookies, cakes, muffins, pies and many other goods. This suggests that:
A. the elasticity of supply of cupcakes is relatively high. B. the elasticity of supply of cupcakes is relatively low. C. the supply curve for cupcakes is downward sloping. D. cupcakes are a normal good.
The crowding-out effect refers to which of the following?
A) reductions in aggregate demand that occur as the government enacts a fiscal policy that is intended to eliminate an inflationary gap B) price increases that result in less purchasing power for consumers C) increases in consumption spending that leave fewer resources available for the economy to use to create capital D) reductions in private investment spending that offset increases in other spending