Use the following general linear demand function below:Qd = a + bP + cM + dPRwhere Qd = quantity demanded, P = the price of the good, M = income, PR = the price of a good related in consumption.If c = 15 and d = 20, the good is
A. a normal good.
B. an inferior good.
C. a substitute for good R.
D. a complement with good R.
E. both a and c
Answer: E
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The movement of the budget line from BB to bb in the above figure suggests that income has:
A) increased and the price of X has decreased. B) fallen and the price of Y has increased. C) fallen and the price of X has decreased. D) decreased but there have been no price changes.
Suppose many businesses want to increase their stock of capital goods and decide to borrow funds to do it. Which would be the likely result of this event?
A. Interest rates would increase B. Interest rates would decrease C. The equilibrium quantity of loanable funds would decrease D. The equilibrium quantity of loanable funds would remain unchanged