The wealth effect explains the:
A. positive relationship that exists between consumer spending and overall price level.
B. negative relationship that exists between consumer spending and overall asset valuation.
C. positive relationship that exists between consumer spending and overall asset valuation.
D. negative relationship that exists between consumer spending and overall price level.
Answer: D
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The total interest that a borrower has to pay on a loan is equal to the:
A) principal plus the rate of interest. B) principal divided by the rate of interest. C) principal minus the rate of interest. D) principal times the rate of interest.
Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units. Using the midpoint method, the elasticity of demand equals
A) 1.17. B) 0.85. C) 0.26. D) 1.56. E) None of the above answers is correct.