Economists who support a monetary rule as opposed to an activist monetary policy believe that the effectiveness lag in monetary policy is
A) short and variable, policy changes affect AD quickly and are predictable.
B) zero, policy changes have an immediate effect on expenditures.
C) long and variable, policy changes affect AD slowly over time and are unpredictable.
D) long, but predictable.
C
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If a 5 percent increase in income brings about a 10 percent decrease in the demand for a good, then the
A) good is a normal good. B) good is an inferior good. C) income elasticity of demand is 0.5. D) income elasticity of demand is 2.0. E) income elasticity of demand is 5.0.
The marginal benefit from pollution abatement
A. decreases as pollution abatement increases because of the law of diminishing marginal utility. B. is constant as pollution abatement increases because pollution abatement is valued for its own sake and not for the utility it provides. C. decreases as pollution abatement increases because of the law of diminishing marginal product. D. increases as pollution abatement increases because people learn to want an even cleaner environment as the environment gets cleaner.