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2) Assume that the price elasticity of demand is 1.5 and supply is perfectly inelastic. And
suppose that the supply of the Palestinian olive oil has increased by 30%. What is the new
price if the old price is $10/KG? Explain.
1) Assume that for olive oil in Palestine, the price elasticity of demand is 0.8 and the price
elasticity of supply is 0.7. And suppose that the demand for the Palestinian olive oil has
increased by 20%. Do you think the price of Palestinian olive oil would increase or decrease?
By how much? Explain and show calculations.
Assume that the equilibrium price of Building Stone in West Bank is $20/m, and the
equilibrium quantity is 1000m. Suppose that the Government sets a maximum quantity
800m on the building stone market. How this policy would affect consumer surplus,
producer surplus, and total surplus. (Explain your answer by drawing a complete graph)
Assume that the equilibrium price of rice in West Bank is $ 1.5 /KG. Suppose that the
government decided to set a maximum price of rice equal to $1 /KG:
Use the demand and supply curves to show the effects of the new price on the quantity
consumed of rice.
Who is benefiting from fixing the price of rice at $1/KG? The consumer or producer.
Explain your answer using demand and supply curves.
It is correct to conclude that the:
a) The monetary base is equal to cash in circulation.
b) The money supply is equal to the monetary base.
c) The money supply does not include sight deposits.
d) The monetary base is equal to banks’ cash reserves.
e) None of the above
It is incorrect to conclude that:
a) When the income tax rate is 0 and the multiplier is 10, the MPC = 0.9.
b) If the income tax rate is 0.1 and the MPC = 1, then the multiplier is equal to 10. c) If the income tax rate is 0.2 and the MPC = 0.75, then the multiplier is equal to 0.9375.
d) If the tax rate is 1 the MPC cannot be calculated.
e) None of the above
Suppose the consumption function is C = 100 + 0.95YD. If the tax rate changes from t = 0 to t = 30%, then the increase in government spending that leaves the equilibrium income unaffected is:
a) 1,478
b) 2,000
c) 2,570
d) 10,280
e) 570
In the long-run the IS-LM model predicts that:
a) Only monetary policy can change real output.
b) Only fiscal policy can change real output.
c) Both monetary and fiscal policy can change real output.
d) Monetary and fiscal policies change real output only when used together.
e) Neither monetary nor fiscal policy can change real output.
Contractionary monetary policies, other things being equal, will
a) Move the economy down a fixed aggregate demand curve.
b) Move the economy up a fixed aggregate demand curve.
c) Shift the aggregate demand curve to the right.
d) Shift the aggregate demand curve to the left.
e) None of the above.
n the long-run IS-LM model, the long-run effect of a contractionary fiscal policy is to: a) Increase real output and the interest rate.
b) Decrease real output and the interest rate.
c) Increase real output and leave the interest rate unchanged.
d) Decrease the interest rate and leave real output unchanged. e) Not change either real output or the interest rate.
Which one of the following will not likely occur as a result of the economy’s automatic stabilizers operating during periods of inflation?
a) The size of the investment and government spending multiplier falls.
b) The aggregate spending curve shifts upward.
c) The aggregate spending curve shifts downwards.
d) The MPC of national income is reduced.
e) The rate of inflation is slowed
Suppose the consumption function is C = 100 + 0.95YD. If the tax rate changes from t = 0 to t = 30%, then the increase in government spending that leaves the equilibrium income unaffected is:
a) 1,478
b) 2,000
c) 2,570
d) 10,280
e) 570
Other things equal, a decrease in the price level will
a) Move the economy down a given aggregate demand curve.
b) Move the economy up a given aggregate demand curve.
c) Shift the aggregate demand curve to the right.
d) Shift the aggregate demand curve to the left.
e) None of the above
01) The investment multiplier is
02)If the MPC for the economy is 0.8, the:
a) MPS is 1/0.8
b) The multiplier is 5.
c) The multiplier is undefined.
d) The MPS is 0.4
e) The multiplier is 0.8
Other things constant, an increase in the households’ willingness to save more at every level of income will cause the consumption function to:
a) Become flatter because the MPC rises.
b) Make a downward parallel shift.
c) Remain stationary but the saving function to shift upward.
d) Become steeper because the MPC declines.
e) Shift to the left and upwards.
Suppose that in a simple economy there is no government taxing or spending and no foreign trade. A correct statement of the multiplier is:
a) k = 1/mpc
b) k = 1/(1+mpc)
c) k = 1/(1-mps)
d) k = 1/(1-mpc)
e) k = 1/(mpc+mps)
Quantity demanded= 20000-3P
quantity supplied= 15000+2P
a. calculate the equilibrium price and quantity.
b. calculate the price elasticity of supply using the point method when the economy is in equilibrium.
What will happen to the equilibrium quantity and equilibrium price of renewable
energy resources if energy sector improves the technology?
