The effects of tax cuts or government spending dissipate and each additional change in consumption and income becomes smaller and smaller because
A) some of the increase in income will be lost through taxation.
B) some of the increase is saved and does not result in an increase in consumer demand.
C) some of the increase in consumption will be an additional demand for imported goods.
D) All of the above.
E) None of the above.
D
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A perfectly inelastic demand curve exhibits
A) zero responsiveness to changes in price. B) zero quantity demanded when there is a slight change in price. C) a change in quantity demanded that is proportional to the change in price. D) a change in quantity demanded that is always twenty percent of the change in price.
To correct a nominal quantity for changes in the price level, one should:
A. multiply it by a price index. B. divide it by a price index. C. add a price index to it. D. subtract a price index from it.