The cross elasticity of demand for good A with respect to good B is 0.2 . A 10 percent change in the price of good B will lead to a ____ percent change in the quantity of good A demanded. Goods A and B are _______
A. 2; substitutes
B. 0.5; complements
C. ?2; complements
D. ?0.5; substitutes
A The change in the quantity of good A demanded is computed as (0.2) × (10 percent), which is 2 percent; the cross price elas-ticity is positive, so the goods are substitutes.
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In the country of Darrowby, net domestic income at factor cost is $2.0 million. Gross domestic product is $3.0 million, and depreciation is $0.5 million. Indirect taxes less subsidies ________
A) are $1 million B) are $0.5 million C) cannot be calculated D) are -$0.5 million
Suppose stock prices rise. To offset the resulting change in output the Federal Reserve could
a. increase the money supply. This increase would also move the price level closer to its value before the rise in stock prices. b. increase the money supply. However, this increase would move the price level farther from its value before the rise in stock prices. c. decrease the money supply. This decrease would also move the price level closer to its value before the rise in stock prices. d. decrease the money supply. However, this decrease would move the price level farther from its value before the rise in stock prices.