Which of these statements correctly explains the shape of the aggregate demand curve?
a. As prices fall, nominal income rises and so does the demand for real goods and services
b. Rising prices reduce people's wealth and thereby decrease spending.
c. With falling prices, government decides to spend less to increase the price level.
d. Businesses increase investment spending in response to higher interest rates caused by inflation.
e. As prices fall, domestically produced goods become more expensive relative to foreign goods, resulting in an increase in production.
b
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Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause a(n):
a. upward movement along the demand curve for bus travel. b. downward movement along the demand curve for bus travel. c. rightward shift in the demand curve for bus travel. d. leftward shift in the demand curve for bus travel.
The consumption function has a negative slope
a. True b. False Indicate whether the statement is true or false
A rise in the federal funds rate _________ reserves and _________ the quantity of deposits and bank loans created.
Fill in the blank(s) with the appropriate word(s).
Suppose buyers in the used car market are willing to pay $3,500 for a plum (high-quality) used car and $1,500 for a lemon (low-quality) used car. If buyers believe that 30% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?
A. $2,000 B. $2,500 C. $2,900 D. $3,500