Refer to the diagram for the federal funds market. A $25 billion increase in reserves will change the interest rate to:
A. 3.0 percent.
B. 3.5 percent.
C. 4.0 percent.
D. cannot be determined with the above information.
D. cannot be determined with the above information.
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Would you expect the income elasticity of demand for Cadillacs to be positive or negative? Why is this true?
What will be an ideal response?
A. greater in the long run than in the short run. B. greater in the short run than in the long run. C. the same in both the short run and the long run. D. greater for "necessities" than it is for "luxuries."
A. The larger an item is in one's budget, the greater the price elasticity of demand. B. The price elasticity of demand is greater for necessities than it is for luxuries. C. The larger the number of close substitutes available, the greater will be the price elasticity of demand for a particular product. D. The price elasticity of demand is greater the longer the time period under consideration.