If the demand for hand-sewn leather shoes increases, it is highly likely the demand for:
A. all shoe-types will also increase.
B. skilled sewers will increase.
C. needle and thread will decrease.
D. leather will decrease.
Answer: B
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Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will generate a(n) ________ gap and inflation will ________.
A. recessionary; increase B. expansionary; decrease C. expansionary; increase D. recessionary; decrease
Which of the following is not a necessary characteristic of a successful price discriminator? a. It has market power. b. It can prevent the resale of the product
c. Its marginal costs of production differ across customers. d. Willingness to pay for its product differs across customers.
Steve takes $500 from his paycheck and uses it to purchase U.S. Savings Bonds. Based on this information:
A. Steve has a capital gain of $500. B. Steve's saving has increased by $500. C. Steve's saving has decreased by $500. D. Steve's wealth is unchanged.
Suppose the economy is initially in long-run and short-run equilibrium. If the Fed decides to pursue a contractionary monetary policy, we will see
A. bond prices fall, interest rates rise, aggregate demand falls as investment spending decreases and consumption spending remains unchanged, and real GDP and the price level decrease in the short run, but only the price level falls in the short run. B. bond prices fall, interest rates fall, aggregate demand remains unchanged as consumption spending decreases, but investment spending increases. GDP remains constant in both the short run and the long run, but the price level falls in both. C. bond prices fall, interest rates rise, aggregate demand falls as investment and consumption spending decrease, and real GDP and the price level decreasing in the short-run, but only the price level decreasing in the long run. D. interest rates rise but no change in bond prices. Aggregate demand falls as consumption spending and investment spending decrease, and the price level and real GDP fall in both the short run and the long run.