A temporary adverse supply shock directly causes
A. a shift to the left of the FE line.
B. a shift down and to the right of the LM curve.
C. a shift down and to the left of the IS curve.
D. a shift up and to the right of the IS curve.
Answer: A
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Refer to Table 4-1. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of one of the bottles is $95 dollars, total consumer surplus will be
A) $0. B) $35. C) $80. D) $95.
Joe and Rita each have some cookies and milk. Joe is willing to trade 2 cookies for an additional ounce of milk. Rita is willing to trade 4 cookies for an additional ounce of milk
If trading is possible, which of the following is most likely to occur? A) Joe will give some milk to Rita in exchange for cookies. B) Rita will give some milk to Joe in exchange for cookies. C) No trade will take place since they both prefer to have more milk and fewer cookies. D) There is not enough information to make any predictions.
A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate:
a. demand to shift rightward. b. demand to shift leftward. c. supply to shift rightward. d. supply to shift leftward. e. supply and aggregate demand to both shift equally inward.
Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must
a. decrease the money supply, which shifts aggregate demand further right. b. decrease the money supply, which shifts aggregate demand left. c. increase the money supply, which shifts aggregate demand further right. d. increase the money supply, which shifts aggregate demand left.