The usual results of an adverse supply shock are
a. a rise in prices and a fall in output.
b. a fall in prices and a rise in output.
c. increased growth and lower inflation.
d. a rise in prices and a rise in output.
A
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Which of the following statements is correct?
A) PPP is a theory of exchange rate determination. B) Inflation differentials cause changes in exchange rates. C) PPP is an equilibrium relationship between two endogenous variables. D) PPP, or the law of one price, should hold well for individual goods.
The formal game theory model assumes that:
A. the dominant firm in the industry will set product price and other firms will follow. B. each player tries to anticipate the reaction of his or her rivals when making a decision. C. each player ignores the possible reaction of his or her rivals when making a decision. D. markets are contestable when no barriers to entry exist.
The Keynesian analysis of fiscal policy argues that:
A. fiscal policy should generally be expansionary except during periods of economic recession. B. fiscal policy should generally be restrictive except during inflationary booms. C. the federal budget should be balanced annually except during war. D. the federal budget should be used to maintain aggregate demand at a level consistent with full employment.
If government regulations forced companies to purchase new pollution control technology, ______.
a. the supply curve would shift to the left b. the demand curve would shift to the left c. production would be increased d. equilibrium price would be lower