Exhibit 10-7 Aggregate supply and demand curves
In Exhibit 10-7, if aggregate demand increases from AD1 to AD2,
A. output and prices will increase.
B. output and prices will decrease.
C. output alone will increase.
D. prices alone will increase.
Answer: D
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The long-run average cost curve
A) is the sum of a firm's short-run average cost curves. B) shows the lowest average cost facing a firm as it increases output changing both its plant and labor force. C) initially rises when output increases and then falls when output increases. D) always falls as output increases. E) always rises as output increases.
Rolls-Royce may actually sell fewer cars at lower prices due to the “snob effect.”
Answer the following statement true (T) or false (F)
If the Fed raises the federal funds rate, which of the following occurs?
A) Consumption expenditure decreases. B) Investment increases. C) The price of the dollar on the foreign exchange market increases. D) Net exports increase. E) Aggregate demand increases.
A reserve ratio of 0.10 means that a bank can lend an amount equal to:
A. 90 percent of its deposit liabilities. B. 10 percent of its excess reserves. C. 90 percent of its excess reserves. D. 10 percent of its deposit liabilities.