Refer to the given diagram. Assume that nominal wages initially are set on the basis of the price level P 2 and that the economy initially is operating at its full-employment level of output Q f . In the short run, an increase in the price level from P 2 to P 3 will:
A. change aggregate supply from AS 2 to AS 3 .
B. increase real output from Q 1 to Q 2 .
C. change aggregate supply from AS 2 to AS 1 .
D. increase real output from Q f to Q 2 .
D. increase real output from Q f to Q 2 .
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The terms of trade are
A) the terms negotiated in a trade agreement. B) exports plus imports divided by GDP. C) the value of the real exchange rate. D) taxes plus transaction costs paid on imports. E) the ratio of export prices to import prices.
Which of the following would tend to INCREASE the elasticity of demand for good X?
A. a new product, Y, which can be used in place of X, is introduced. B. the percent of a consumer's income spent on good X declines. C. a new discovery allows firms to produce X at a much lower cost. D. both b and c E. all of the above
The nation of Hyperbole is in a recession, and the government decides to increase taxes and reduce government spending to reduce the growing deficit. This will ________ aggregate demand and will likely ________ real GDP and employment
A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase
Refer to the information provided in Figure 2.5 below to answer the question(s) that follow.
Figure 2.5Refer to Figure 2.5. The economy is currently at Point B. The opportunity cost of moving from Point B to Point A is the
A. 120 LCD TVs that must be forgone to produce 20 additional OLED TVs. B. 30 LCD TVs that must be forgone to produce 40 additional OLED TVs. C. 20 OLED TVs that must be forgone to produce 30 additional LCD TVs. D. 40 OLED TVs that must be forgone to produce 120 additional LCD TVs.