Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the short run would be:
A. P1 and Y2.
B. P2 and Y3.
C. P3 and Y1.
D. P2 and Y2.
Answer: B
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Before Walmart's entry into the retail pharmacy business which drove down prices, existing pharmacies
a. were operating efficiently, so this is an example of predatory pricing. b. were colluding on price, so this is an example of a contestable market. c. were not operating as efficiently as afterwards, so this is not a case of predatory pricing. d. did not advertise but were forced to do so by the new competition.
Explain the potential downfalls of the Fed implementing an expansionary monetary policy or contractionary monetary policy at the wrong time
What will be an ideal response?
"Tying" is a form of price discrimination which involves a buyer
A) agreeing to purchase a product at a fixed price regardless of the amount purchased. B) paying different prices based on the amounts of a product purchased. C) required to buy one product in order to purchase some other product. D) All of the above
Suppose the economy is initially experiencing a short-run recessionary gap. An increase in the size of the budget deficit will
A) increase the size of the recessionary gap. B) reduce the size of the recessionary gap. C) lead to an increase in prices with no increase in real GDP. D) lead to a decrease in prices with an increase in real GDP.