The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy
Indicate whether the statement is true or false
TRUE
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Dorothy lives in a city with high air pollution. Pollution is a bad, but she is able to avoid air pollution by wearing a face mask. Her preferences are given by
U(q1,q2 ) = (q1 - P)2q22 where q1 is the amount of time she spends wearing a mask, P is the amount of pollution and q2 is a composite of other goods (p2 = 1 ). Dorothy must decide how much to wear a mask and how much q2 to purchase. The price of masks is pM. Assume q1* > P when answering this question. a. Derive Dorothy's demand for masks, q1*(p1,Y, P) b. How does the quantity of pollution affect the demand for masks? That is, find q1*/P. c. How does her income influence the quantity of masks she purchases? That is, find q1*/Y. d. What condition must hold for the assumption q1* > P to hold?
An impartial observer who attempts to settle disagreements by listening to both sides separately and making suggestions is called a(n)
a. collective bargaining agent b. arbitrageur c. mediator d. binding negotiator e. judge
If investment is not sensitive to changes in the interest rate, then changes in the money supply: a. will have no effect on interest rates
b. will have no impact on the quantity of money demanded. c. will have no effect on the aggregate demand of an economy. d. will have a major impact on the aggregate demand of an economy. e. will have a major impact on the price level in an economy.
Three landscapers, Allen, Betty, and Christina, are visiting the lawn and garden supply store. Allen is choosing between a mower with a 40-inch blade and a mower with a 28- inch blade. Betty is picking up her mower, which was in for scheduled maintenance. Christina is putting up a For Sale sign advertising her equipment and list of customers. Who is operating in the short run?
a. Allen and Betty b. Betty and Christina c. Allen only d. Betty only e. Christina only