Use the Following to Answer Questions

question 225

Multiple Choice

Use the following to answer questions:
Figure: Short-Run Equilibrium
-(Figure: Short-Run Equilibrium) Look at the figure Short-Run Equilibrium. Appropriate fiscal policy action is:

• A)a decrease in transfer payments.
• B)an increase in government purchases.
• C)a decrease in tax rates.
• D)an increase in transfer payments.

---

Definitions:

Cross-Price Elasticity

A measure of the responsiveness of the demand for one product in relation to a change in the price of another product.

Substitutes

Products or services that can be used in place of each other, fulfilling the same need or purpose.

Cross-Price Elasticity

A measure indicating how the demand for one good responds to a change in the price of another good, showing whether they are substitutes or complements.

Complementary Goods

Goods that are often used together so that the consumption of one increases the demand for the other.