A positive temporary supply side shock will:
A. increase the level of potential output in the long run.
B. decrease the price level in the long run.
C. increase the price level in the long run.
D. have no effect in the long run.
Answer: D
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In the above figure, if the interest rate is 4 percent, people
A) sell bonds so as to convert them into money. B) buy bonds so as to have a better store of value. C) petition the Fed to tighten the quantity of money. D) buy stocks, because stocks are more liquid than currency.
Jane produces only corn, measured in tons, and cloth, measured in bolts. For her, the opportunity cost of one more ton of corn is
A) the same as the opportunity cost of one more bolt of cloth. B) the inverse of the opportunity cost of one more bolt of cloth. C) the ratio of all the bolts of cloth she produces to all the tons of corn she produces. D) the ratio of all the tons of corn she produces to all the bolts of cloth she produces.
You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants
You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce. What is likely to happen in the restaurant market in your hometown after you open? A) Your competitors are likely to change their menus to make their products more similar to yours. B) While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic. C) The demand curve facing each restaurant owner becomes more elastic. D) The demand curve facing each restaurant owner shifts to the right.
The prime rate
A) is charged by high quality corporations to each other. B) is charged by banks to each other. C) is charged by the Federal Reserve to member banks. D) is charged by banks to high quality corporations. E) fluctuates on a day-to-day basis as do other rates.