Refer to the graph below with three demand curves. A "decrease in demand" would be illustrated as a change from:
A. Point 1 to point 4
B. Point 1 to point 3
C. Line C to B
D. Line A to C
Answer: D
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How does the adverse selection problem faced by insurance companies differ from the moral hazard problem they face? How might an insurance company deal with each problem?
What will be an ideal response?
The government might increase its spending to end a recession because:
A. allowing the short-run aggregate supply to adjust since back to the long-run can take a long time. B. the economy experiences lower prices at the long-run equilibrium. C. the economy enjoys a higher level of output in the long run. D. None of these justify why the government might change its spending to end a recession.
When you purchase a share of stock, you are
A) borrowing funds from the corporation. B) lending funds to the corporation. C) selling an ownership right in the corporation. D) acquiring an ownership right in the corporation. E) b and d
Which of the following is an example of an automatic stabilizer?
A) Congress increases the tax rate during an expansion. B) Congress authorizes spending increases during a recession. C) More unemployment benefits are paid during a recession. D) Welfare payments decrease during a recession.