Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run
a. real GDP will rise and the price level might rise, fall, or stay the same.
b. real GDP will fall and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.
Answer; c. the price level will rise, and real GDP might rise, fall, or stay the same.
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Which of the following statements is CORRECT?
A) When demand increases, both the price and the quantity increase. B) When demand decreases, the price rises and the quantity decreases. C) When supply increases, the quantity decreases and the price rises. D) When supply decreases, both the price and the quantity decrease.
If the quantity of donuts supplied is represented by the supply equation QS = -15 + 5P, then to solve for the price of donuts, the equation would be rewritten as
A) P = 5QS + 75. B) P = 15 - 0.5QS. C) P = QS - 7.5. D) P = 0.2QS + 3.
A pessimistic view of the 1986 tax reform is that Congress simplified the tax code _____
a. because it represented a Pareto superior move b. created new loophole opportunities that did not exist previously c. in order to increase the efficiency in the system d. because it was in the best interests of the special interests
The labor supply curve starts to bend backward once the
A. Marginal revenue product of labor equals the marginal utility of leisure. B. Substitution effect exceeds the income effect. C. Income effect exceeds the substitution effect. D. Total utility of leisure outweighs the total utility of labor.