Other things equal, an increase in the Z factors ________ the equilibrium interest rate and ________ equilibrium output.
A. increases; decreases
B. decreases; decreases
C. decreases; increases
D. increases; increases
Answer: A
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
The relationship between a change in the price of a complementary good and demand for another complementary good is
A) positive. B) negative. C) inconclusive. D) zero.
[Appendix; Advanced Material] If airlines found that the number of no-shows starts to increase, then its policy for optimal overbooking would tend to:
a. make them reduce the amount of overbooking. b. cause them to increase the amount of overbooking. c. let them keep the same amount of overbooking.
If the firms in a monopolistically competitive market are earning short-run economic profits, then
a. each existing firm will increase output in the long run as its marginal revenue curve shifts rightward b. each firm will experience an increase in the demand for its output in the long run c. each firm's profit will drop to normal in the long run as its demand curve shifts leftward due to entry of new firms d. barriers to entry will enable them to earn economic profits in the long run e. decreased demand for a key input will reduce that input's price in the long run and lower each firm's average total cost curve