Which statement about price elasticity of demand along a linear demand curve is true?
a. As the quantity demanded increases, so does the buyer's sensitivity to price.
b. When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes.
c. The ratio of current price to quantity demanded is a good estimate of the elasticity of demand.
d. As the prices of goods increase, the elasticity of demand increases.
e. When an individual buys 4 units of a good his/her elasticity of demand for each unit increases.
d
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Monetarism is a school of thought put forth by Milton Friedman. He argued that the economy would most likely
A) be unstable. B) be at potential GDP. C) be above potential GDP. D) be below potential GDP.
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and real GDP rises. b. The real risk-free interest rate falls, and real GDP rises. c. The real risk-free interest rate rises, and real GDP falls. d. The real risk-free interest rate and real GDP remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.