Micro/Macro Economics Flashcards
1
Q
What is cross -price elasticity of demand?
A
Quantity demanded of one good changes in response to a change in the price of another good.
2
Q
What does the price elasticity of supply measure?
A
Quantity supplied responds to changes in the price of the good.
3
Q
What are the key factors of price elasticity?
A
- Availablity of substitues
- if the good is a luxury or necessity
- portion of income spent on the good
- time that has elapsed since the time the price changed
4
Q
When is demand price elastic?
A
Buyers respond substantially to changes in the price of the goods.
5
Q
What is the price elasticity of supply?
A
Measures how much the quantity supplied responds to changes in price,
6
Q
Key determinent of the price elasticity of supply?
A
Time period being considered
7
Q
Tools used to lower depression
A
- Fiscal Policy - Controlled by congress which controls government expenditures and taxes
- Monetary Policy - Controlled by the fed and controls the amount of money in the economy
8
Q
How to increase Fed Money Supply
A
- Open Market Purchases
- Decrease the Discount Window Rate
- Decrease Reserve Requirement Ratio
9
Q
How does the Fed decrease interest rates?
A
- The Fed buys bonds, prices are pushed higher and interest rates decrease.
