In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Consumer expectations that the price of X will rise sharply in the future will:
A. increase D, decrease P, and increase Q.
B. increase D, increase P, and increase Q.
C. increase S, increase P, and increase Q.
D. decrease S, increase P, and increase Q.
Answer: B
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A farmer sells raw milk for 50 cents to a dairy, who sells cheese made from it for $1.50 to a grocery wholesaler, who sells it for $1.90 to a supermarket, who sells it to the final consumer for $2.19. These transactions increase the GDP by
A) $0.50 + $1.00 + $0.40 + $0.29 = $2.19. B) $0.50 + $1.00 + $1.90 + $2.19 = $5.59. C) $0.50 + $1.00 = $1.50. D) $2.19 - $1.50 = $0.69. E) $2.19 - $0.50 = $1.69.
If Ms. Anniston transfers $1,000 from her checking account to her money market account, then
a. M1 falls and M2 remains the same. b. M1 falls and M2 rises. c. both M1 and M2 rise. d. M1 remains the same and M2 rises.
In the presence of ________, the market mechanism can break down.
A. extensive form games B. normal form games C. asymmetric information D. common knowledge
The following data show nominal GDP and the appropriate price index for several years. Compute real GDP for each year and indicate whether you have “inflated” or “deflated” nominal GDP in finding real GDP. All GDP are in billions
