A business doubled the price of a product in order to increase profits. Which of the following scenarios might have occurred?
a. A sharp increase in revenues demonstrated the elasticity of the product.
b. A dramatic decline in revenues demonstrated the elasticity of the product.
c. A dramatic decline in revenues demonstrated the inelasticity of the product.
d. A small increase in revenues demonstrated the unit elasticity of the product.
Ans: b. A dramatic decline in revenues demonstrated the elasticity of the product.
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In the traditional Keynesian model, an increase in government spending raises total planned real expenditures by more than the original increase in government spending because
A) of the crowding-out effect on consumption spending. B) consumption spending is not related to real GDP. C) consumption spending depends positively on real GDP. D) consumption spending depends negatively on real GDP.
Lowincomesville is a poor town. The mayor has decided to impose a law to cut all rental rates on apartments in half and to fix them at this level. Will this help the poor? Why or why not? Be sure to distinguish between the short run and the long run