If People Have More Time to Adjust to a Price

question 234

Multiple Choice

If people have more time to adjust to a price change, the price elasticity of demand for that good is likely to

• A)increase
• B)decrease
• C)fall to zero
• D)become equal to -1
• E)remain unchanged

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Definitions:

Potential GDP

The maximum possible level of output an economy can achieve when it is most efficiently utilizing its resources.

Unemployment

A situation where individuals who are able and willing to work cannot find jobs, measured as a percentage of the labor force.

Expansionary Fiscal Policy

Government policy aimed at stimulating economic growth by increasing government spending, reducing taxes, or both.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheating economy by increasing interest rates and reducing the supply of money.