If the price of capital declines, the consequent output effect would be:
A. greater, the more elastic the demand for the product.
B. greater, the less elastic the demand for the product.
C. negative.
D. of consequence only if capital and labor are used in fixed proportions.
Answer: A
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Purchasing power parity can be used as
A) a long-run gauge, but in the short run large deviations in currency values can exist. B) a short-term gauge, but in the long run large deviations in currency values can exist. C) an indicator of how interest rates will change in the short run. D) an indicator of how interest rates will change in the long run. E) a short-term and long-term gauge of relative currency values.
If the marginal propensity to consume (MPC) is 0.80, the value of the spending multiplier is 2
a. True b. False Indicate whether the statement is true or false