Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise the price level?
a. both the shift of aggregate demand and the shift of aggregate supply
b. the shift of aggregate demand, but not the shift of aggregate supply
c. the shift of aggregate supply, but not the shift of aggregate demand
d. neither the shift of aggregate demand nor the shift of aggregate supply
b
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Cost-plus pricing is a reasonable way to determine the optimal price when
A) fixed costs are high. B) marginal cost and average cost are roughly equal. C) fixed costs vary. D) fixed cost and variable costs are roughly equal.
With expansion in the level of output, total fixed cost:
a. declines but remains positive. b. increases. c. falls to zero. d. remains constant. e. becomes negative.
Why is monetary policy more effective in an open economy than in a closed economy?
A. Trade deficits affect exchange rates, which can offset adverse interest rate effects. B. Borrowers can choose to use foreign capital, so that interest rate effects are stronger than expected. C. Interest rate changes affect exchange rates, so that capital flows reinforce the effect of monetary policy. D. Banks can choose to lend to foreigners, so that interest rate effects are essentially nullified.
In which of the following market structures are entry barriers the highest?
A. Monopolistic competition. B. Perfect competition. C. Oligopoly. D. Monopoly.