Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer, and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice?
A. The price of apple juice might rise or fall and the quantity of apple juice falls.
B. The price of apple juice might rise or fall and the quantity of apple juice rises.
C. The price of apple juice falls and the quantity of apple juice falls.
D. The quantity of apple juice might rise or fall, and the price of apple juice rises.
Answer: A
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Refer to the figure above. If the yuan is allowed to float, at exchange rates below E yuan per dollar:
A) the excess supply of dollars in exchange for yuan increases the value of the dollar in the foreign exchange market. B) the excess supply of dollars in exchange for yuan lowers the value of the dollar in the foreign exchange market. C) the excess demand for dollars in exchange for yuan lowers the value of the dollar in the foreign exchange market. D) the excess demand for dollars in exchange for yuan increases the value of the dollar in the foreign exchange market.
When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy, then
A) inflation will be lower. B) output will be at its potential. C) output will be lower. D) inflation will not change. E) both A and B.
Bonds differ from stocks in all of these ways except:
a. a purchase of corporate stock becomes a part owner of the corporation, while a bondholder does not b. a bondholder loans money to the corporation, which has priority for repayment, while a stockholder may lose her investment c. stockholders know with a high degree of certainty how much money they will get, while bondholders do not d. all of these are correct
If the Fed were to purchase euros for dollars and at the same time sell U.S. Treasury securities in the open market, this would be an example of:
A. the Fed not changing their balance sheet at all. B. the Fed altering the domestic monetary base. C. an unsterilized foreign exchange intervention. D. a sterilized foreign exchange intervention.