Question

Please explain if the following statements are true, false or both:

a) Increased investments decrease national savings.

b) Monetary neutrality is: "When money supply changes, relative price doesn't change either"

c) In monopoly, marginal revenue is always lower than the price.

d) Deadweight loss due to taxation is greater when supply and demand elasticity is greater

Answer 1

A) False

Investment is directly proportional to National income

Hence if national i come increases, investment also increases.

B) False

When money supply changes, according to money neutrality the price will also change.It only affect nominal variables.

C) True

Yes in monopoly, there will be price effect where marginal revenue will be lowrr than price

D) True

Deadweight loss due to taxation is greater when supply and demand elasticity is greater is a true statement.

Deadweight loss is directly proportional to elasticity of demand and supply.