If two goods are complements,
A) the demands for both goods will be elastic.
B) cross price elasticity of demand will be 0.
C) cross price elasticity of demand will be negative.
D) cross price elasticity of demand will be positive.
Answer: C
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Refer to Figure 19-8. The equilibrium exchange rate is at A, $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D2
After the shift, A) there is a surplus of euros equal to 400 million. B) there is a surplus of euros equal to 500 million. C) there is a shortage of euros equal to 800 million. D) there is a shortage of euros equal to 1,000 million.
The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are
A. clothing and education. B. capital goods and durable consumer goods. C. military goods and capital goods. D. services and nondurable consumer goods.