Why does a price ceiling set below the equilibrium price of a good lead to a shortage of the good in the market?
What will be an ideal response?
A price ceiling is set below the market price of the good. At the lower price, the quantity demanded of the good increases while the quantity supplied falls. As a result, a shortage of the good occurs in the market.
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Suppose the Fed increases the money supply. As a result of this, people go out and spend more money on consumer goods, increasing aggregate spending. This is known as a(n)
A) indirect effect of monetary policy. B) direct effect of monetary policy. C) indirect effect of fiscal policy. D) direct effect of fiscal policy.
Suppose Stan transfers $1,000 from his checking account into a savings account. What are the effects on M1 and M2 money supply?
A) M1 increases; M2 decreases. B) M1 decreases; M2 remains the same. C) Both M1 and M2 increase. D) Both M1 and M2 decrease. E) Both M1 and M2 remain the same.
Cobb-Douglas production functions can never possess varying returns to scale
Indicate whether the statement is true or false
Suppose one year ago the price index was 120 and Maria purchased $20,000 worth of bonds. One year later the price index is 126 . Maria redeems her bonds for $22,700 and is in a 40 percent tax bracket. What is Maria's real after-tax rate of interest to the nearest tenth of a percent?
a. 5.1 percent b. 3.1 percent c. 2.1 percent d. 2.4 percent