When the U.S. price level falls, the open economy effect indicates that
A. U.S. residents will move away from domestic goods and buy more foreign goods.
B. U.S. imports will rise.
C. U.S. exports will increase.
D. foreigners will buy fewer U.S. goods.
Answer: C
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The nation of Hyperbole is in a recession, and the government decides to increase taxes and reduce government spending to reduce the growing deficit. This will ________ aggregate demand and will likely ________ real GDP and employment
A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, the short run market supply function is:
A. Qs = 40P if price is greater than $20. B. Qs = P/4 if price is greater than $20. C. Qs = 2.5P if price is greater than $20. D. Qs = 300 - 10P for all prices.
If Camila's income rises by 20 percent, and, as a result, she purchases 40 percent more dresses, her income elasticity for dresses is
a. 0.5. b. 1.0. c. 2.0. d. Not enough information is given to answer this question.
Distinguish between a movement along the aggregate supply curve and a shift of the entire aggregate supply curve. What factors cause each to occur?
What will be an ideal response?