In moving along a demand curve, which of the following is not held constant?
A. the price of the product for which the demand curve is relevant
B. consumer incomes
C. people's tastes and preferences
D. price expectations
Answer: A
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
Equilibrium real income is more stable in the face of aggregate autonomous expenditure variability under
A) a floating exchange rate. B) a pegged exchange rate. C) a fixed exchange rate. D) perfect capital mobility systems.
The Bretton Woods exchange rate system was an example of a
A) target zone. B) managed float. C) pure gold standard. D) modified gold standard. E) floating exchange rate system.
Refer to Figure 9.1. Assume the economy is initially at point A. The eventual change from a shock that increases investment expenditure is best represented by which long-run equilibrium combination of price level and real GDP?
A) P2; Y2 B) P3; Y1 C) P1; Y2 D) P2; Y1