Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C
B. D; B
C. A; B
D. B; C
Answer: B
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The demand curve is:
A. a downward-sloping line that reflects the inverse relationship between price and quantity. B. an upward-sloping line that reflects the inverse relationship between price and quantity. C. a downward-sloping line that reflects the positive relationship between price and quantity. D. an upward-sloping line that reflects the direct relationship between price and quantity.
On a production possibilities curve, the optimal or best combination of output for any society:
A. depends upon the preferences of society. B. is at a point near the bottom of the curve. C. is at the precise midpoint of the curve. D. is at a point near the top of the curve.
According to purchasing power parity, which of the following is FALSE about an overvalued dollar compared to the Japanese yen?
A) U.S. merchants would be motivated to import more Japanese goods. B) Japanese merchants would tend to export more to the United States. C) Prices in the United States would tend to fall. D) Over the long term, the exchange rate would fall.
Economic rent applies to
A. land only and nothing else. B. any resource in fixed supply. C. real property only. D. all resources.