When the price of a good changes, the amount of that good that buyers wish to buy changes:
A. solely because of the income effect.
B. only if the substitution effect and the income effect do not cancel out each other.
C. solely because of the substitution effect.
D. because of both the substitution and the income effects.
Answer: D
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Movement along a supply curve implies
A) quantity demanded changes as the price changes. B) supply changes as the price changes. C) suppliers' plans change when the price changes. D) all of the above.
According to classical economists, in the quantity theory of money,
a. the price level is strictly a function of the supply of money b. the supply of money is strictly a function of the price level c. if output is constant, an increase in the quantity of money will cause the price level to fall d. the money supply and the price level are inversely related e. the money supply is controlled by the government which is why we have had moderate (and sometimes more than moderate) inflation
The law of supply states that other things being equal
A. supply creates its own demand. B. supply will increase to meet demand if demand increases. C. supply will increase if productivity increases. D. as price increases, quantity supplied increases.
If the dollar interest rate is 10 percent, the euro interest rate is 12 percent, then
A) an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent. B) an investor should invest only in euros an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent. C) an investor should be indifferent between dollars and euros an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent. D) an investor should invest only in dollars. E) an investor should invest only in euros.