-Refer to the Above Diagram

question 106

Multiple Choice

-Refer to the above diagram.The level of government spending:

• A) is equal to tax collections at each level of GDP.
• B) is the same at all levels of GDP.
• C) varies inversely with the level of GDP.
• D) varies directly with the level of GDP.

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Definitions:

Downward-sloping

A graphical representation indicating a negative relationship between two variables, such as price and quantity demanded in the demand curve.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, quantitatively expressed as the percentage change in quantity demanded divided by the percentage change in price.

Inelastic

An inelastic good or service has a demand that does not change significantly when its price goes up or down.

Insensitive to Price

A characteristic of demand wherein the quantity demanded by consumers changes very little with a change in the product's price.