Author Question: Suppose there is a 10 percent increase in the price of good X and it causes a 10 percent decrease in ... (Read 23 times)

mpobi80 · **on:** Jun 30, 2018

Suppose there is a 10 percent increase in the price of good X and it causes a 10 percent decrease in the quantity of X demanded. Price elasticity of demand for X is
a. 0.
b. 1.
c. 10.
d. 100.

Question 2

Which of the following is false?
a. If the Fed wants to expand the money supply, it could lower the discount rate.
b. The discount rate is a relatively unimportant monetary policy tool, mainly because member banks do not rely heavily on the Fed for borrowed funds.
c. Changes in required reserve ratios are such a potent monetary policy tool that they are frequently used.
d. If the Federal Reserve wanted to induce monetary expansion, it could reduce reserve requirements, but it cannot force the banks to make loans, thereby creating new money.