Demand-pull inflation is caused:
a. by increases in production costs.
b. by increases in tax rates by the government.
c. by trade unions' pressure for wage hike.
d. when spending increases in an economy producing at its maximum capacity.
e. when increases in the supply of goods are exactly offset by increases in spending.
d
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A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2
0, the demand in Florida A) has an elasticity of -6.0. B) is more price elastic than the demand in New York. C) has an elasticity of -1.2. D) has an elasticity of -0.67.
New classical economists stress that an increase in government expenditures financed by borrowing rather than taxes will
a. exert a strong expansionary impact on aggregate demand and real output. b. affect the timing of taxes but not their magnitude. c. lead to higher interest rates. d. undermine confidence and reduce the level of private saving.