Assume the current price of good X is too high, i.e., it is above the equilibrium price. Describe the changes that would occur in a market as a result, i.e., explain how the market would adjust to equilibrium
What will be an ideal response?
The fact that the current price is too high would mean that there is a surplus of good X. Suppliers would respond by decreasing the price of the good and, as a result, quantity supplied. The decrease in price would also cause quantity demanded to increase until the surplus (excess supply) was eliminated.
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Special interest groups are subsets of the general population that
A) attempt to influence government officials for the benefit of the general population. B) choose to be rationally ignorant because they are interested only in things that the government is not concerned with. C) are on the fringes of the political spectrum. D) a and c E) none of the above
Which of the following statements is true?
A) If the opportunity costs differ between two countries, there is no opportunity for mutually advantageous trade. B) International trade leads countries to specialize in the production of those goods for which they have an absolute, rather than a comparative, advantage. C) Free international trade can increase the availability of all goods and services in the countries that participate in trade. D) The potential costs of free trade generally outweigh the benefits.
The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at Point A, a triple intersection. Here, the FE curve is flatter than the LM curve.
Assume that the economy was initially at Point A. Which of the following would have caused the economy to move to and remain at Point B?
A. Expansionary monetary policy with sterilization B. Expansionary monetary policy without sterilization C. Contractionary fiscal policy without sterilization D. Expansionary fiscal policy with sterilization
Which of the following is not a characteristic of a market with a price floor?
A. Quantity demanded exceeds quantity supplied B. Sellers offering discounts in disguised forms C. Problem of disposal created by excess supply D. Survival of less efficient businesses