Macro Exam 2
when demand is unit elastic, price elasticity of demand equals
1, and total revenue does not change when price changes
How to calculate inflation rate
(CPI this year - CPI last year) / CPI last year
A perfectly elastic demand implies
any rise in price above that represented by the demand curve will result in a quantity demanded of zero
An increase in price causes an increase in total revenue when demand is
inelastic
when demand is inelastic, the price of elasticity of demand
is zero, and the demand curve is vertical
if the price rises, when the price elasticity of demand likely to be the highest
one year after price increase
demand is inelastic when
price and total revenue increases
When consumers face rising gasoline prices, they typically
reduce their quantity demanded more in the long run than in the short run
what is not a determinant of the price elasticity of demand for a good
steepness or flatness of the supply curve for the good
As long as prices are rising over time, then
the nominal interest rate exceeds the real interest rate
Which component accounts for largest portion of U.S. GDP?
Consumption