The above table gives the demand and supply schedules for cat food. If the supply increases by 20 tons at every price, what is the new equilibrium price and quantity?
What will be an ideal response?
The equilibrium price is $1.50 per pound of cat food because that is the price at which the quantity demanded equals the (new) quantity supplied. The equilibrium quantity of cat food is 46 tons per year.
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Which one of the following is an example of discretionary fiscal policy used to correct a recessionary gap?
A) a tax decrease passed into law by Congress B) an increase in the money supply by the Federal Reserve C) a decrease in government expenditures approved by Congress D) an agreement among major banks to raise interest rates
Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher
The Fed can use all of the following except ________ to change the lending capacity of the banking system.
A. the reserve requirement B. the discount rate C. open market operations D. the excess reserve requirement
In Figure 5-3, the price elasticity of demand equals __________ between points T and U and equals __________ between points V and W
a.
0.33; 1.86
b.
0.54; 3
c.
3; 0.54
d.
1.86; 0.33
e.
2; 2