A decrease in supply means that:
a. demand will increase by the same amount.
b. the quantity demanded will increase.
c. there is a movement down and to the left along the supply curve.
d. the quantity supplied at every price will decrease.
e. the supply curve will shift out and to the right.
d
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What will be an ideal response?
The market for "lemons" is one in which
a. the rational buyer discounts b. the seller's product claims are unverifiable at the point of purchase c. "the bad apples drive out the good" d. the problem of adverse selection is rampant e. all of the above
During the 1970s, demand-management policy: a. continued to be highly successful in curing the economy's economic problems
b. was found to be highly unsuitable in periods of stagflation such as the decade of the 1970s. c. was so unsuccessful that economists advised a return to the pre-World War II philosophy of fiscal policy. d. was unsuccessful because automatic stabilizers no longer influenced the economy. e. was unsuitable because it affected aggregate supply more than aggregate demand.
Suppose that the central bank is required to follow a monetary policy rule to stabilize prices. If the economy starts at long-run equilibrium and then aggregate supply shifts right, the central bank would have to
a. increase the money supply, which causes output to move closer to its long-run equilibrium. b. increase the money supply, which causes output to move farther from long-run equilibrium. c. decrease the money supply, which causes output to move closer to its long-run equilibrium. d. decrease the money supply, which causes output to move farther from long-run equilibrium.