If a 4 Percent Decrease in Income (At a Constant

question 57

Multiple Choice

If a 4 percent decrease in income (at a constant price) results in a 2 percent decrease in the consumption of dweedles then

• A)the income elasticity of demand for dweedles is negative.
• B)dweedles are a necessity and a normal good.
• C)dweedles are a luxury and a normal good.
• D)dweedles are an inferior good.
• E)both A and D.

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Definitions:

Average Price Level

An index reflecting the overall direction and movement of prices within an economy, serving as an indicator of inflation or deflation over time.

Quantity Theory of Money

A theory stating that the general price level of goods and services is directly proportional to the amount of money in circulation.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often used to gauge inflation.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate measure of economic output over time by valuing goods and services at constant prices.