Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to
a. decrease consumption, which shifts aggregate supply left.
b. decrease consumption, which shifts aggregate demand left.
c. decrease investment, which shifts aggregate demand left.
d. decrease investment, which shifts aggregate demand right.
Answer: b. decrease consumption, which shifts aggregate demand left.
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The consumption function shows that when disposable income increases by one dollar, consumption expenditure
A) does not change. B) increases by more than a dollar. C) increases by one dollar. D) decreases by less than a dollar. E) increases by less than a dollar.
If all prices rise by 5 percent and money income remains constant, the new budget line will have
A) a steeper slope. B) a flatter slope. C) a positive slope. D) the same slope.
If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce
a. True b. False Indicate whether the statement is true or false
If a tax (paid by producers) on a good is reduced, this would
A. move its supply curve to the right. B. move its supply curve to the left. C. cause a movement along the supply curve to a (lower price, lower quantity) point. D. cause a movement along the supply curve to a (higher price, higher quantity) point.