Refer to the graph shown. In the graph, a recessionary gap exists if the price level is:
A. P0 and the aggregate demand curve is AD1.
B. P0 and the aggregate demand curve is AD0.
C. P1 and the aggregate demand curve is AD0.
D. P1 and the aggregate demand curve is AD1.
Answer: C
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Other things the same, if the Fed increases the quantity of money, the supply of money curve shifts
A) rightward and the nominal interest rate decreases. B) leftward and the real interest rate increases. C) leftward and the nominal interest rate increases. D) leftward and the nominal interest rate decreases. E) rightward and the real interest rate increases.
You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that
a. the mayor thinks demand is elastic, and the city manager thinks demand is inelastic. b. both the mayor and the city manager think that demand is elastic. c. both the mayor and the city manager think that demand is inelastic. d. the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a
a. resource industry. b. exclusive industry. c. government monopoly. d. natural monopoly.
A star basketball player signs a contract that newspaper reports say is worth $10 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth
A. more than $10 million because the present value of $5 million received one or more years from now is more than $5 million. B. less than $10 million since the present value of $5 million received one or more years from now is less than $5 million. C. $10 million as reported in the papers. D. either more or less than $10 million, depending on the value of the discount rate.