The recessionary GDP gap will differ from the AD shortfall when the
A. Multiplier effect lowers spending.
B. Multiplier effect raises spending.
C. Aggregate supply curve slopes upward.
D. Budget is balanced.
Answer: C
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In the market for magazines, the "income effect" means that
A) magazines are usually purchased by people with higher than average incomes. B) a decrease in the price of a substitute product like books will make magazine readers feel a little poorer than they were before. C) an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines. D) an increase in the price of magazines will raise the relative price of magazines to books, causing magazine readers to read more books and fewer magazines.
In a laissez-faire system, the price mechanism dictates the production planning decisions.
Answer the following statement true (T) or false (F)
A price floor is
a. a maximum price above which the good cannot be legally bought or sold b. the lowest price buyers are willing to pay for a good. c. a minimum price below which the good cannot be legally bought or sold. d. a minimum price above which the good cannot be legally bought or sold.
If the price of product L increases, the demand curve for close-substitute product J will:
A. shift downward toward the horizontal axis. B. shift to the left. C. shift to the right. D. remain unchanged.