If the Fed sells securities on the open market, bond prices will tend to ____ and interest rates will tend to _____.
Fill in the blank(s) with the appropriate word(s).
fall; rise
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Use the following graph of the bicycle market to answer the question below.
S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), which point on the graph is most likely to be the new equilibrium after an increase in wages of bicycle workers and a significant increase in the price of gasoline?
A. 4 B. 3 C. 5 D. 6
What assumptions are made concerning wages and prices in a classical economic model?
What will be an ideal response?
In the short-run, a supply shock will lead to
A) movement of prices and output in the same direction. B) movement of prices and output in opposite directions. C) a sustained inflation. D) a movement in prices, but not output.
The price of diamonds is high, in part because the majority of the world's diamonds are controlled by a single firm. This is an example of
a. a market failure caused by an externality. b. a market failure caused by market power. c. a market failure caused by equality. d. There is no market failure in this case.