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