When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:
A. output, causing it to definitely decrease.
B. prices, causing them to definitely rise.
C. output, causing it to definitely increase.
D. prices, causing them to definitely fall.
Answer: A
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Rhonda views movie tickets and DVD rentals to be substitute forms of entertainment. An increase in the price of a DVD rental will probably result in an increase in the: a. supply of movie tickets
b. quantity of movie tickets demanded. c. quantity of DVD rentals demanded. d. demand for movie tickets.
Define the terms recessionary gap and inflationary gap. Why do they occur?
Contrast a positive supply shock with a negative supply shock.
a. A positive supply shock increases short-run aggregate supply, whereas a negative supply shock decreases short-run aggregate supply. b. A positive supply shock is an expected event, whereas a negative supply shock is an unexpected event. c. A positive supply shock is permanent, whereas a negative supply shock is temporary. d. A positive supply shock causes the short-run aggregate supply curve to shift leftward, whereas a negative supply shock causes the short-run aggregate supply curve to shift rightward.
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease