Refer to Figure 6-13. Which of the following price floors would be binding in this market?
a. $3
b. $4
C. $5
d. $6
Answer: d. $6.
Price floor is binding when it is above equilibrium because it is minimum price and if it is below equilibrium then anyone can charge than that the market price will be the equilibrium and no need of price floor
the equilibrium is at
$5 so the price above it is binding
it is $6
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If you were to use an Aggregate Supply - Aggregate Demand diagram to model nondiscretionary and discretionary fiscal policy in reaction to a negative aggregate demand shock, you would see the aggregate demand curve move
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