In the above figure, start with the economy in equilibrium at point A. Then an unanticipated reduction in aggregate demand triggers a shift from AD1 to AD2. In the short run, this would cause
A. the price level to fall by some amount less than P1 but greater than P2, and the rate of unemployment would decrease.
B. the price level to fall from P1 to P2, real Gross Domestic Product (GDP) to fall from Y1 to Y2, and the rate of unemployment to increase.
C. no change in either the price level or real Gross Domestic Product (GDP), but a decrease in unemployment.
D. the price level to move from P1 to P2, but real Gross Domestic Product (GDP) would stay at Y1.
Answer: B
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Members of the European Union decided to adopt a single currency by what year?
A) 2008 B) 2005 C) 1999 D) 1992
If in the long run, any government policy that increases exports
A) also increases imports. B) decreases imports. C) has no impact on imports. D) makes imports become negative.
When a perfectly competitive, well-functioning market is not in equilibrium:
A. total surplus is not maximized. B. there are no exchanges that can make some better off without someone becoming worse off. C. the market is efficient. D. All of these are true.
The Grinch is now the mayor of your hometown, and he's still trying to steal Christmas. On the day after Thanksgiving, he announces a $25 tax on fresh Christmas trees. Tree farmers are angry to hear this because they have already delivered this season's
freshly cut trees to the tree lots in your town. You hear your neighbors planning to buy an artificial tree, and your family decides to drive to the next town to buy a tree. a . Who will bear the biggest share of the burden the first Christmas season this tax is in effect? Why? b. Will your answer change for subsequent Christmases? Why?