If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output.
B. lower price level and lower level of output.
C. higher price level and higher level of output.
D. lower price level and higher level of output.
Answer: A
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Holding large amounts of bank capital helps prevent bank failures because
A) it means that the bank has a higher income. B) it makes loans easier to sell. C) it can be used to absorb the losses resulting from bad loans. D) it makes it easier to call in loans.
What is one definition of equity?
a) equality b) efficiency c) fairness d) similarity
When positive externalities exist in a market, if a Pigouvian subsidy is imposed:
A. those who interact in the market will gain surplus. B. those who do not interact in the market, but are affected by the externality, will gain surplus. C. those who interact in the market will lose surplus. D. None of these statements is necessarily true.
A tax system that applies a lower marginal tax rate at higher levels of income is
A) progressive. B) regressive. C) proportional. D) flat.