Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes
or complements?
The cross elasticity of demand equals -0.275. The value is negative so the goods are complements.
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The person on the other side of a transaction is referred to as the:
A) derivator B) counterparty C) hedger D) speculator
Critics of fixed exchange rates argue that fixed rates: a. reduce uncertainty in international trade
b. result in currency shortages just as wage and price controls lead to shortages in markets for goods and services. c. make nations less constrained in carrying out in internal macroeconomic policies. d. lead to constant, day-to-day changes in the exchange values of currencies.
Fixed exchange rates restrict macroeconomic policy more than flexible exchange rates.
Answer the following statement true (T) or false (F)
If the velocity of the M1 money supply is 4 and nominal GDP is $200 billion, the stock of money in circulation must be:
A. $25 billion. B. $50 billion. C. $100 billion. D. $800 billion.