What are the three reasons why the aggregate demand curve slopes downward? Give an example of each
The real balance effect occurs because as the aggregate price level declines, a given amount of money will now buy more goods. The interest rate effect occurs because as the aggregate price level declines, the real money supply rises. Given that money is now less scarce, real interest rates will fall, causing an increase in investment and consumption. The international substitution effect occurs because as the aggregate domestic price level declines (relative to the foreign price level), domestic exports become less costly to foreigners, causing domestic net exports to rise.
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If price discrimination enables sellers to increase net revenues, why don't all sellers try it? Because
A) some sellers can't manipulate their price. B) some sellers can't control resentment. C) some sellers can't prevent low-price buyers reselling to high-price buyers. D) of all the above reasons.
When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________
A) less expensive; increase B) more expensive; decrease C) less expensive; decrease D) more expensive; increase
Is it possible for sellers to benefit more than consumers from a subsidy to buyers?
A. Yes, if the sellers need it more. B. Yes, if the supply curve is relatively less elastic than the demand curve. C. Yes, if the supply curve is relatively more elastic than the demand curve. D. Producers can never benefit more than buyers from a subsidy to buyers.
The RAND Health Insurance experiment compared costs of HMOs with the costs of indemnity insurers. The study
a. confirmed the cost-saving potential of HMOs. b. Found no cost-saving by HMOs. c. the HMO had per capita costs that were 28% lower than the indemnity d. both a and c