A decrease in demand will have what effect on equilibrium price and quantity?
A. Price will increase; quantity will decrease.
B. Price will decrease; quantity will increase.
C. Both price and quantity will increase.
D. Both price and quantity will decrease.
Answer: D
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What is the Lucas critique, and why was it so important to macroeconomists in the 1970s?
What will be an ideal response?
If an increase in the level of money supply leads to a proportionate increase in prices with no effect on real variables ,we say that
A) the Fisher relationship holds. B) money is neutral. C) money is superneutral. D) money is a medium of exchange.
Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the
A) AVC curve. B) MC curve. C) LAC curve. D) AFC curve.
The national income and consumption data for the United States over the time period 1970–91 creates a consumption curve that runs through the origin. This differs from the consumption curve depicted by Keynes or by Duesenberry (MPC falling or remaining constant as income increases) which shows the curve beginning above the origin. The explanation is that
a. the consumption curve reflecting the data is a short-run consumption function b. the consumption curve reflecting the data is only meant to be an approximation to the reality of the Keynesian and Duesenberryian curves c. the Keynesian or Duesenberryian consumption curves are long-run consumption functions d. the consumption curve reflecting the data is a long-run consumption function e. autonomous consumption in the United States is equal to $0