Suppose that the federal government imposes a price floor (support price) in the milk market at a price of $3 per gallon. If market quantity demanded at $3 is 1 billion gallons, and if market quantity supplied is 1.5 billion gallons, then which of the following is true?
a. There is a surplus of 1 billion gallons of milk, and the federal government will buy 1.5 billion gallons to maintain the $3 price.
b. There is a shortage of 500 million gallons of milk, and the federal government will buy an additional 500 million gallons to maintain the $3 price.
c. There is a shortage of 500 million gallons of milk, and the federal government will buy 1 billion gallons to maintain the $3 price.
d. There is a surplus of 500 million gallons of milk, and the federal government will buy this 500 million gallons to maintain the $3 price.
d
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Suppose real money demand is L = 0.8 Y - 100,000 (r + ?e). If the nominal money supply is 12,000, real output is 15,000, the real interest rate is .02, and the expected inflation rate is .01, then the price level is
A) 3/4. B) 1. C) 4/3. D) 3.
A game of incomplete information is distinct from one of complete information in that players:
a. do not observe each others' actions. b. do not know each others' payoff functions. c. do not know the timing of moves. d. use mixed strategies.
We should expect the consumption function to shift downward if
a. real interest rates rise. b. price levels fall. c. consumers become more optimistic about future incomes. d. consumers become more pessimistic about future incomes.
If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line?
A) The budget line rotates inward from the intercept on the axis of the good that did not change in price. B) The budget line rotates outward from the intercept on the axis of the good that did not change in price. C) The budget line shifts inward without a change in slope. D) The budget line shifts outward without a change in slope.