Ivy Software Mba Prepworks Fundamentals Of Economics Exam Questions (286 Terms) With Verified Definitions Updated 2024

Suppose the price elasticity for demand for retail phone service in the US is 0.95. If the # of retail substitutes for retail telephone service increases, will the price elasticity of demand become more elastic or more inelastic? {Ans: Elastic. When the number of substitute products increases, the price elasticity of demand will become more elastic. consumers become more sensitive to price when they have more options to chose among.}an increase in the value of money from one period to the next is called inflation (T/F) {Ans: false}If consumers' expectations about the state of the economy improve, ceteris paribus, the change will cause the economy to move into a(n)______ gap and will cause the price level to _______ {Ans: inflationary/increase}Policy Instrument: the required reserve-deposit ratio. The Federal Reserve bank should ________ the required reserve deposit ratio if the economy is in a deflationary gap. {Ans: decrease.}Economies of scale {Ans: occur over a range of production in which average total costs decline as output increases (ie: creation of software, a pharmaceutical pill) they have large fixed costs and relatively low marginal costs.}The menu costs effect {Ans: argues that because it can be expensive to change