Suppose you observe an increase in the equilibrium price of coffee and a decrease in the equilibrium quantity of coffee. Of the options listed below, this is most consistent with:
A. a decrease in consumer income assuming coffee is a normal good.
B. an increase in consumer income assuming coffee is a normal good.
C. a decrease in the cost of producing coffee.
D. an increase in the cost of producing coffee.
Answer: D
You might also like to view...
Under monetary stabilization policy in the New Keynesian model, following a drop in output, the central bank should
A) increase the price level. B) decrease the price level. C) increase the interest rate. D) decrease the interest rate.
The certainty equivalent approach to accounting for risk in capital budgeting involves
A) adjusting the discount rate used to calculate net present values. B) adjusting the expected cash flows. C) estimating the coefficient of variation. D) estimating the standard deviation of the net present values.
When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:
A. output, causing it to definitely decrease. B. prices, causing them to definitely rise. C. output, causing it to definitely increase. D. prices, causing them to definitely fall.
If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in government spending causes a _____ change in the price level and a _____ change in output.
a) big; big b) big; small c) small; big d) small; small