The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?
why the aggregate-demand curve slopes downward
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Classical macroeconomic theorists believed that if there were more workers who wanted to work than there were firms who wanted to hire them, then wages would ________.
A. not change B. rise slowly C. resist falling D. fall quickly
Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Most governments subsidize basic education because
A) there are external costs associated with well educated citizens. B) the marginal social benefit of education is greater than the marginal private benefit. C) of the existence of private schools. D) None of the above answers are correct.
After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?
a. Price will increase, and quantity will decrease. b. Price will decrease, and quantity will decrease. c. Price will decrease, and quantity will increase. d. Price will increase, and quantity will increase.