Jacob buys less soda when the price of soda rises 10 percent, while the prices of all other goods also rise 10 percent. Jacob is
A. suffering from money illusion.
B. worrying too much about a coming recession.
C. paying too much attention to changes in relative prices.
D. behaving in accordance with classical economic theory.
Answer: A
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If the price of suntan lotion increases from $6 to $8 per bottle and quantity demanded decreases from 900,000 bottles to 845,000 bottles, using the midpoint method, what is the price elasticity of demand for suntan lotion?
What will be an ideal response?
Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year
Refer to the above data. For the years shown, the growth of
A.
Real GDP exceeds the growth of nominal GDP
B.
Nominal GDP exactly reflects increases in real output
C.
Nominal GDP overstates increases in real output
D.
Nominal GDP understates increases in real output