When inflation occurs, consumers
a. realize gains in their wealth.
b. increase spending to catch up with higher prices.
c. automatically shift the consumption line upward.
d. suffer a decrease in real wealth.
d
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The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.
As one moves down a straight-line demand curve, the elasticity increases.
Answer the following statement true (T) or false (F)
In the long run in a perfectly competitive market:
A. firms earn zero economic profits. B. firms operate at an efficient scale. C. supply is perfectly elastic when all firms have the same cost structure. D. All of these are true.
In a market system, how are the terms of exchange established?
a. Industry associations set up acceptable price ranges for their goods, and firms within each industry are required to set price within its relevant range. b. The forces underlying supply and demand interact to set a price c. Federal and state legislation establish minimum and maximum prices. d. Consumer advocacy groups establish fair prices for items, and most firms comply because they don’t want to anger their customers.