Markets can be least well-defined by
a. product similarity
b. location
c. price elasticity
d. cross-price elasticity
e. degree of firm interdependence
C
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Refer to the above figure. The government has just engaged in expansionary fiscal policy shifting the aggregate demand curve from AD1 to AD2. Interest rates have started to rise. Which of the following statements is TRUE in the short run?
A) Real GDP will be $14 trillion since the effect of government spending is not influenced by interest rates. B) Real GDP will end up somewhere between $11 and $14 trillion as businesses and consumers reduce their spending in response to the increase in interest rates. C) Real GDP will go beyond $14 trillion as businesses and consumers react to the increase in interest rates. D) Real GDP will fall back to $11 trillion since the effect that increased government spending has on real GDP is short lived.
Holding supply constant, an increase in demand will
A) increase both the quantity and price. B) increase the equilibrium price and decrease the equilibrium quantity. C) decrease the equilibrium price and increase the equilibrium quantity. D) decrease both the quantity and price.
According to the assignment rule, which of the following policy mixes is appropriate for a country with high inflation, a balance of payments surplus, and fixed exchange rates?
A. Expansionary fiscal policy and expansionary monetary policy B. Contractionary fiscal policy and expansionary monetary policy C. Contractionary fiscal policy and contractionary monetary policy D. Expansionary fiscal policy and contractionary monetary policy
If the demand for a product falls and the supply stays the same
A) the market clearing price will fall and the equilibrium quantity will rise. B) the market clearing price will rise and the equilibrium quantity will fall. C) both the market clearing price and the equilibrium quantity will fall. D) both the market clearing price and the equilibrium quantity will rise.