If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output.
B. lower price level and lower level of output.
C. higher price level and higher level of output.
D. lower price level and higher level of output.
Answer: A
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If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?
A) an increase in the value of the dollar relative to other currencies B) a decrease in business confidence C) an increase in wealth D) an increase in interest rates
To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation
What will be an ideal response?
Fixed investment is typically ________
A) smaller than inventory investment B) calculated as the change in holdings of raw materials and finished goods C) planned spending on equipment, structures, and new residential housing D) all of the above E) none of the above
The deregulation of the airline industry caused
a. prices to fall and service to decline b. prices to fall and service to improve c. prices to rise and service to decline d. prices to rise and service to improve