Multiple choice

Question 1

The most important determinant of the degree of elasticity of demand is:

A. whether or not the item is a big ticket item.

B. whether or not the item is a luxury or not.

C. how many uses the product has.

D. the availability of substitutes.

Question 2 

If a car dealership decides to offer a rebate to reduce the selling price of its cars and as a result finds an increase in its total revenues, then the demand for cars from this dealership is:

A. price elastic.

B. price inelastic.

C. rebate inelastic.

D. unit elastic.

Question 3 

Precautionary cash balances: 

A. are invested in insurance policies by people who are highly risk-averse. 

B. were emphasized by classical writers on monetary theory. 

C. are intended primarily for unexpected expenditures. 

D. grow when individuals acquire personal lines of credit. 

Question 4 

Money is NOT: 

A. a medium of exchange. 

B. a standard of value. 

C. a store of value. 

D. the exclusive means of holding wealth.