If commodities X and Y are substitute, their cross elasticity of demand will be
One
positive
Negative
Zero
Correct answer is B
Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If two goods are substitutes, an increase in the price of one will lead to an increase in demand for the other, and vice versa. Therefore, the cross elasticity of demand for substitutes is positive.
Which of the following is an example of expansionary monetary policy by the Central Bank of Nigeria?
Lowering income taxes
Increasing the discount rate
Increasing the reserve ratio
Buying Treasury securities from commercial banks
Correct answer is D
Expansionary monetary policy is used to increase the money supply in an economy. When the Central bank buys securities, it aims to expand the volume of money in circulation and where there is too much money in circulation, the CBN will sell securities.
The demand for money will fall if
People expect deflation soon
Real GDP rises
Real interest rates rise
The GDP deflator rises
Correct answer is C
If GDP falls, then people demand less money for transactions. As interest rate rise (fall), the demand for money will fall(rise).
The law of supply states that, other things being constant, as price increases
Supply increases
Supply decreases
Quantity supplied increases
Quantity supplied decreases
Correct answer is C
The law of supply says that a higher price will induce producers to supply a higher quantity to the market i.e. the higher the price, the greater the quantity supplied and vice versa.
An increase in money income with constant price results in
Outward shift in the budget line
Inward parallel shift in the budget line
Options A and C
Budget line remain constant
Correct answer is A
If the income of consumer changes (upward or downward), the aggregate satisfaction of the consumer would also change (upward or downward) provided the prices remain the same. An increase in consumers' income will shift the budget line outwards while a decrease in consumers' income will shift the budget line inward.