Real GDP definitely increases if
A) the AS curve shifts leftward and the AD curve does not shift.
B) the AD curve shifts leftward and the AS curve shifts rightward.
C) both the AD curve and the AS curve shift rightward.
D) both the AD curve and AS curve shift leftward.
E) potential GDP decreases so that real GDP exceeds potential GDP.
C
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Suppose a paper mill earns $1,000,000 in profits when it pollutes a river, and it can abate pollution at a cost of $75,000. The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean and $300,000 if it's polluted. Suppose the law guarantees the farmer access to clean water from the river. Which of the following describes an efficient outcome in this case?
A. The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river. B. The owner of the mill pays the farmer $87,500 for his permission to pollute the river. C. The owner of the mill pays the farmer $112,500 for his permission to pollute the river. D. The farmer pays the owner of the mill $87,500 to stop polluting.
An increase in all of the following will increase aggregate demand EXCEPT
A) investment. B) savings. C) exports. D) government spending.
The speculative demand for holding money is when people hold money:
a. instead of near money. b. to transact purchases they expect to make. c. as insurance against unexpected needs. d. to speculate in the stock market. e. to take advantage of changes in interest rates.
Which of the following is an aim of a price-fixing agreement?
a. Reducing entry barriers b. Increasing profit c. Reducing price d. Increasing demand