Exhibit 10A-6 Aggregate demand and supply model
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Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 10A-6, the real GDP and price level (CPI) in long-run equilibrium will be:
A. $10 billion and 200.
B. $4 billion and 150.
C. $10 billion and 150.
D. $10 billion and 100.
Answer: D
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Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?
A) "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit." B) "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower." C) "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming." D) "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!"
Which of the following is true?
a. Once the equilibrium price and output is reached, all the mutually beneficial trade opportunities between suppliers and demanders will have taken place, and the sum of consumer and producer surplus is maximized. b. The deadweight loss of a tax is the difference between the lost consumer and producer surplus and the tax revenue generated. c. Those goods that are heavily taxed often have a relatively inelastic demand curve in the short run, so that the burden falls mainly on the buyer, and the deadweight loss to society is smaller than if the demand curve was more elastic. d. All of the above are true.
A subsidy on a product will generate more actual benefit for consumers (and less for producers) when
a. the supply of the product is relatively inelastic. b. the supply of the product is relatively elastic. c. the demand for the product is relatively elastic. d. either a or c is true.
Currently most developed countries meet or exceed the U.N.'s Millennium Aid Goal for donor country GDP.
Answer the following statement true (T) or false (F)