Define the term normal good. How can a normal good be recognized from
(i) the Engel curve diagram,
(ii) the income elasticity of demand, and
(iii) the substitution and income effects of a price change?
A normal good is one for which a rise in income will cause a rise in quantity demanded. A good is normal if
(i) the Engel curve is upward sloping,
(ii) the income elasticity of demand is positive, or
(iii) the substitution and income effects of a price change move in the same direction.
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Which is the most likely effect upon the market for cotton of a greatly increased price for corn, which can usually be grown on land suitable for cotton cultivation?
A) The demand for cotton will decrease and the quantity exchanged will fall. B) The demand for cotton will increase and the quantity exchanged will rise. C) The supply of cotton will increase and the quantity exchanged will rise. D) The supply of cotton will decrease and the quantity exchanged will fall. E) The supply of cotton will increase and the quantity exchanged will fall.
________ real GDP increases the demand for money and ________ the nominal interest rate decreases the quantity of money demanded
A) Increasing; increasing B) Increasing; decreasing C) Decreasing; increasing D) Decreasing; decreasing