Suppose that the EPA has proposed strict controls on the amount of sulfur that diesel fuel contains. These controls were designed to fully offset the cost of pollution generated by diesel fuel vehicles. The effect of the regulation is estimated to increase the equilibrium price of a gallon of diesel fuel by 10 cents. Suppose that demand for diesel fuel is perfectly inelastic and supply has a positive slope. The effect of the regulation will ________ than if demand were not perfectly inelastic.
A. increase price and quantity by more
B. increase price by more and reduce quantity by less
C. decrease price and quantity by more
D. increase price by less and reduce quantity by more
Answer: B
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The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are
A. clothing and education. B. capital goods and durable consumer goods. C. military goods and capital goods. D. services and nondurable consumer goods.
A. Everything else remaining unchanged, if there is no wage rigidity in the market, how will equilibrium employment and wage rate change if there is a leftward shift in the demand curve for labor?
b. Everything else remaining unchanged, if there is no wage rigidity in the market, how will equilibrium employment and wage rate change if there is a rightward shift in the supply curve of labor?
If the deficit is financed by selling bonds to the ________, the money supply will ________, increasing aggregate demand, and leading to a rise in the price level
A) public; rise B) public; fall C) central bank; rise D) central bank; fall
The quantity of money demanded suddenly increases at every combination of GDP and interest rate. If the Fed holds to an unchanged money supply target, the interest rate __________ and GDP __________
A) rises; falls B) rises; remains unchanged C) remains unchanged; remains unchanged D) remains unchanged; falls