A value of the absolute price elasticity of demand equal to 0.6 indicates that
A) a 6 percent increase in price leads to a 10 percent decrease in quantity demanded.
B) a 10 percent increase in price leads to a 6 percent decrease in quantity demanded.
C) a 0.6 percent increase in price leads to a 1 percent decrease in quantity demanded.
D) a 1 percent increase in price leads to a 6 percent decrease in quantity demanded.
B
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The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
The share of GDP taken by taxes is considerably higher in the United States than in other countries.
Answer the following statement true (T) or false (F)
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. If the Chicago-Atlanta round-trip air fare were $350, should you use the coupon to go to Miami?
A. No, your economic surplus would be -$100. B. Yes, your economic surplus would be $50. C. Yes, your economic surplus would be $400. D. No, your economic surplus would be -$50.
The additional taxes needed to pay the interest on the public debt reduce incentives to work, save, invest, and bear risks.
Answer the following statement true (T) or false (F)