Suppose that the cross price elasticity of demand between goods Y and Z equals 1.5. Which of the following is TRUE?
A) Goods Y and Z are complements because the cross price elasticity is greater than one.
B) Goods Y and Z are complements because the cross price elasticity is positive.
C) Goods Y and Z are substitutes because the cross price elasticity is greater than one.
D) Goods Y and Z are substitutes because the cross price elasticity is positive.
Answer: D
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The United States and many other countries often impose trade sanctions on other countries. These sanctions
A) decrease producer and consumer surplus in both the sanctioned and sanctioning countries. B) tend to increase total welfare. C) tend to decrease the deadweight loss. D) tend to decrease consumer and producer surplus only in the sanctioned country.
An inflationary gap refers to the gap between real GDP and potential GDP when the level of output is below the level of potential GDP
a. True b. False Indicate whether the statement is true or false