Using a graph, explain how an increase in technology will affect the equilibrium price and quantity of DVD players. Again using a graph, explain what happens in the market for video cassette recorders.
What will be an ideal response?
The increase in technology causes the supply curve for DVD players to shift to the right. The result is a lower equilibrium price and a higher equilibrium quantity. Because DVD players and Video Cassette players are substitutes, the demand for video cassette players will decrease. As a result, both the equilibrium price and quantity will decrease.
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When the Fed buys a U.S. bond in the open market
A) its action contracts total reserves and the money supply. B) total reserves increase by the amount of the purchase but the money supply stays the same. C) its action expands total reserves and the money supply. D) its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another.
Toyota's just-in-time system is an example of
A) backward (upstream) integration. B) quasi-vertical integration. C) using transfer pricing to avoid price controls. D) horizontal, downstream integration.
If mortgages and houses are complements in consumption and interest rates decrease, we would expect to see
a. An increase in demand for houses b. An decrease in demand for houses c. An increase in the quantity of houses demanded d. An decrease in the quantity of houses demanded
Answer the following statements true (T) or false (F)
1) Economists believe that expectations have little impact on macroeconomic outcomes. 2) Shocks occur when actual events do not match expectations. 3) A demand shock occurs when large numbers of consumers unexpectedly reduce their purchases of goods and services. 4) At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock.