Use the following demand and supply functions: Demand:Qd = 50 - 4PSupply:Qs = 20 + 2PIf the price is $2, there is a
A. surplus of 30 units.
B. shortage of 10 units.
C. surplus of 10 units.
D. shortage of 18 units.
E. none of the above
Answer: D
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The combined effect of a real wage increase is that
A) the income effect always dominates, leading to fewer hours worked at a higher wage. B) the substitution effect always dominates, leading to more hours worked at a higher wage. C) if the substitution effect outweighs the income effect, the labor supply curve slopes downward, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward. D) if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve slopes downward.
In the Spence education signaling model, what is the social value of education?
a. Employees improve their ability to perform on the job. b. Employers can use education as a screen to match talented employees with high-skill jobs. c. Employers can save the costs of on-the-job training, which is less efficient than a general education. d. It allows low-ability employees to apply for high-salary jobs.
The principal reason that monetary policy has lags is that it takes a long time for
a. changes in the interest rate to change aggregate demand. b. changes in the money supply to change interest rates. c. the Fed to make changes in policy. d. Congress and the President to approve Fed policy.
An increase in the spending multiplier causes the IS curve to
A. become flatter. B. shift to the left. C. become steeper. D. shift temporarily to having a positive slope.