When demand is elastic
A) a proportionately small change in price leads to a proportionately large change in quantity supplied.
B) a proportionately small change in price leads to a proportionately small change in quantity supplied.
C) a proportionately small change in price leads to a proportionately large change in quantity demanded.
D) a proportionately small change in price leads to a proportionately small change in quantity demanded.
Answer: C
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What will be an ideal response?
Which is more likely to stimulate aggregate demand in a timely manner?
a. a tax cut, because households will increase their consumption by the full amount of their tax reduction b. a tax cut, because disbursement can take place quickly while spending increases are generally spread out over several years c. a spending increase, because disbursement can take place quickly while a tax cut will be spread out over several years d. a spending increase, because it can be easily reversed once the economy has recovered