Exhibit 4-2 Supply and demand curves
The market shown in Exhibit 4-2 is initially in equilibrium at E3. Changes in market conditions result in a new equilibrium at E4. This change is stated as a(n):
A. increase in demand and an increase in supply.
B. decrease in demand and a decrease in quantity supplied.
C. increase in supply and an increase in quantity demanded.
D. decrease in supply and a decrease in quantity demanded.
Answer: D
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A firm will shut down in the short run if
A) total fixed costs are too high. B) total revenue from operating would not cover all costs. C) total revenue from operating would not cover variable costs. D) total revenue from operating would not cover fixed costs.
When aggregate expenditure is less than? GDP, which of the following is? true?
A) There was an unplanned increase in inventories.
B) Households bought more new homes than they anticipated.
C) Firms spent more on capital goods than they anticipated.
D) All of the above must be true when aggregate expenditure is less than GDP.
One of the major lessons learned in the chapter on experiments and quasi-experiments
A) is that there are almost no true experiments in economics and that quasi-experiments are a poor substitute. B) you should always use TSLS when estimating causal effects in quasi-experiments. C) populations are always homogeneous. D) is that the insights of experimental methods can be applied to quasi-experiments, in which special circumstances make it seem "as if" randomization has occurred.
People prefer to hold less of their wealth in the form of financial assets like bonds and term deposits when: a. real GDP is at an all-time low
b. the real interest rate is above 10 percent. c. the price level is very low. d. the nominal interest rate is close to zero. e. the nominal interest rate is very high.