Certain goods are related so that an increase in the price of one good decreases the demand for the other. These goods are:
a. complements.
b. substitutes.
c. luxury goods.
d. competing goods.
Question 2An increase in the supply of money would decrease the interest rate and increase aggregate demand, other things equal.
a. True
b. False
Indicate whether the statement is true or false
Question 3Reaction lag is the term used to express the fact that some time passes before changes in the money supply are properly translated into changes in real GDP.
a. True
b. False
Indicate whether the statement is true or false
Question 4Which of the following statements is correct regarding the imposition of a tax on gasoline?
a. The incidence of the tax always falls on the buyer.
b. The incidence of the tax depends upon the price elasticities of demand and supply.
c. The incidence of the tax always falls on the sellers.
d. The oil company will ultimately pay.
Question 5Above the equilibrium nominal interest rate, there is a surplus of money.
a. True
b. False
Indicate whether the statement is true or false
Question 6The effect lag occurs because it takes policymakers some time to recognize that a problem exists in an economy.
a. True
b. False
Indicate whether the statement is true or false
Question 7When a tax is imposed on a good for which both demand and supply are very elastic,
a. sellers effectively pay the majority of the tax.
b. buyers effectively pay the majority of the tax.
c. the tax burden is equally divided between buyers and sellers.
d. None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.
Question 8When the supply of money is vertical, changes in money demand will not change the equilibrium quantity of money in existence.
a. True
b. False
Indicate whether the statement is true or false
Question 9Agreeing with Keynesian economists, monetarists believe that the economy is subject to disequilibrium that must be corrected by government action.
a. True
b. False
Indicate whether the statement is true or false
Question 10When a good is taxed, the tax burden
a. falls disproportionately on the side of the market that is more elastic.
b. falls disproportionately on the side of the market that is more inelastic.
c. falls disproportionately on the side of the market that is closer to unit elastic.
d. is not impacted by the relative elasticities of supply and demand.
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