Under the reasonable dynamic assumptions discussed in the text, a monetary contraction should result in
A) an immediate rise in the interest rate, and no further interest rate changes.
B) an immediate rise in the interest rate, and then a fall in the interest rate over time.
C) an immediate rise in the interest rate, and then a further rise over time.
D) a very gradual but steady rise in the interest rate to its new equilibrium level.
E) no change in the interest rate initially, and then a sudden rise to its new equilibrium value.
B
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Goods that are heavily taxed, such as alcohol and cigarettes, often have:
a. relatively inelastic demand, such that the tax burden falls primarily on sellers and the deadweight loss associated with the tax is smaller than if demand were elastic. b. relatively elastic demand, such that the tax burden falls primarily on sellers and the deadweight loss associated with the tax is smaller than if demand were inelastic. c. relatively inelastic demand, such that the tax burden falls primarily on buyers and the deadweight loss associated with the tax is smaller than if demand were elastic. d. relatively elastic demand, such that the tax burden falls primarily on buyers and the deadweight loss associated with the tax is smaller than if demand were inelastic.
Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video. Which of the following is true?
A) The marginal utility of video rentals is negative. B) The marginal utility per dollar spent on books exceeds that of video rentals. C) The marginal utility of the last book consumed exceeds the marginal utility of the last video rental consumed. D) The marginal utility of the last video rental consumed exceeds the marginal utility of the last book consumed.