Exhibit 4-6 Demand and supply curves
In Exhibit 4-6, the demand curve has shifted from D1 to D2 and, simultaneously, the supply curve has shifted from S1 to S2. Describe these actions in this market.
A. Market supply has decreased, and market demand has increased.
B. Market supply has increased, and market demand has decreased.
C. Market supply has decreased, and market demand has decreased.
D. Market supply has increased, and market demand has increased.
Answer: D
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Gross investment
A) is the purchase of new capital. B) includes only replacement investment. C) does not include additions to inventories. D) Both answers A and B are correct.
Suppose a recession occurs as a result of a supply shock, and instead of the economy naturally working its way back to equilibrium, the government uses policy to shift the aggregate demand curve to fight the recession. Using policy this way would
A) quickly result in a new, higher level of real GDP and a permanently lower price level. B) bring real GDP back to potential GDP more slowly but would bring the price level back to the original price level more quickly. C) bring the price level back to its original level more quickly but would result in a permanently lower level of potential GDP. D) bring real GDP back to potential GDP more quickly but would result in a permanently higher price level.
Employees of brokerage firms that rely on forecasting future profits of firms in order to forecast future stock prices are called
A) rational analysts B) adaptive analysts C) technical analysts D) fundamental analysts
According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause
A. prices to rise and output to remain unchanged. B. prices to fall and output to fall. C. prices to rise and output to rise. D. prices to fall and output to remain unchanged.