If a hurricane were to wipe out the majority of the eastern seaboard in the United States, it would likely cause a:
A. short-run supply shock.
B. long-run supply shock.
C. long-run demand shock.
D. short-run demand shock.
Answer: B
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When the LM curve is vertical,
A) fiscal policy has no impact on equilibrium income. B) fiscal policy has no impact on the equilibrium interest rate. C) the economy is at full employment. D) monetary policy has no impact on equilibrium income.
Price elasticity of demand measures the:
A. slope of the demand curve. B. sensitivity of quantity demanded to changes in the price of substitute goods. C. sensitivity of price to changes in the quantity demanded of substitute goods. D. sensitivity of quantity demanded to changes in price.
A firm's short-run supply curve is the firm's marginal cost above:
A. the shut-down point. B. the zero-profit point. C. zero D. the point of diminishing returns.
Refer to the above figure. Suppose that the economy starts at AD1. If the government reduces taxes, then the economy goes to AD2, but then falls back to AD3. This is an example of
A. partial crowding-out effect. B. Ricardian equivalence. C. complete crowding-out effect. D. laissez-faire.