Which of the following reasons helps explain why the aggregate demand curve is downward sloping?
A. The real balances effect or wealth effect: Consumers spend more on goods and services when the price level falls because lower prices increase consumer purchasing power.
B. The producer-push effect: At less than full employment, increases in quantity demanded will raise price, and thus will motivate sellers to produce more.
C. The hidden inflation effect: As the price level rises, consumers fail to recognize that prices are higher, and consequently they fail to reduce expenditures on goods and services.
D. The cost-pull effect: As costs of production rise, consumers are pulled to buy more of the products they want most.
Answer: A
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In the 1980s, the federal government undertook a major build-up of the military sector, leading to reports that prices charged by military contractors were spiraling upward. According to production possibilities analysis, this result is not surprising due to:
A) the law of increasing opportunity cost. B) economic efficiency. C) technical efficiency. D) resource underutilization.
The demand for U.S. dollars by foreign nations increases as:?
What will be an ideal response?
It is impossible to conduct ________ policy and maintain a ________ exchange rate.
A. monetary; floating B. fiscal; fixed C. monetary; fixed D. fiscal; floating
Which of the following is NOT a predictable result of a price ceiling set below the market clearing price?
A) an illegal market in the good B) excess quantity supplied C) excess quantity demanded D) lines to purchase the product