Why is the competitive equilibrium price often referred to as the market clearing price?
What will be an ideal response?
The competitive equilibrium price is determined at the point of intersection of the market demand and the market supply curve. At the point of intersection, the quantity demanded is equal to the quantity supplied in the market, which implies that there is no excess supply or excess demand in the market. Because quantity demanded equals quantity supplied and markets clear at the competitive equilibrium price, the price is also referred to as the market clearing price.
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According to the crowding-out effect, if the government runs a budget deficit of $100 billion, what is the change in the equilibrium quantity of investment?
What will be an ideal response?
Suppose corn farmers encounter a "bumper" corn crop, which results in a significant increase in the market supply curve for corn. Increases in supply will tend to
A) decrease the price of corn. B) increase the demand for corn. C) increase the price of corn. D) decrease the demand for corn.
If the consumption function is defined as C = 7,250 + 0.8Y, what is the multiplier?
A) 0.2 B) 0.8 C) 1.25 D) 5
The slope of a horizontal line is infinite, and the slope of a vertical line is zero
a. True b. False Indicate whether the statement is true or false