How can one tell from cross elasticity what kind of relationship exists between any two goods?
If the price of X increases and the quantity demanded of Y decreases, resulting in a negative cross elasticity, the two goods are complements. If the price of X increases and the quantity demanded of Y increases, resulting in a positive cross elasticity, the two goods are substitutes.
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To shift the RS curve rightward as illustrated, the Fed has ________ government securities in the open market. The Fed will undertake this type of policy if it is concerned about ________
A) sold; recession B) sold; inflation C) bought; recession D) bought; inflation E) None of the above answers is correct.
At the current level of output, the marginal social benefit of pizza exceeds the marginal social cost of pizza. Compared to the allocatively efficient quantity, we are producing too ________ pizza and too ________ of other goods
A) much; little B) much; much C) little; little D) little; much