Which diagram illustrates the effects on the peanut butter market, if severe flooding destroys a large portion of the peanut crop in the economy?
What will be an ideal response?
Answer: d
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When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to
A) a shift upward of the consumption function. B) a movement downward along the consumption function. C) no change in the level of consumption expenditures. D) an increase in consumption expenditures. E) a movement upward along the consumption function.
Suppose that wages are higher in one geographic region (Region 1) of a country than in another geographic region (Region 2). Given free migration of workers,
a. wages in the two regions will become even more divergent. b. wages in Region 1 will rise. c. wages in Region 2 will rise. d. employment in Region 2 will rise.
Why is abstraction important in developing economic theories?
In a recessionary gap, the implications of downward wage inflexibility are that there will be
A) further leftward shifts of AD that worsen unemployment. B) no further leftward shifts of AD, allowing the shifts in SRAS to close the recessionary gap. C) no further leftward shifts of SRAS, allowing the shifts in AD to close the recessionary gap. D) no rightward shifts of SRAS, allowing for the possibility of persistent high unemployment.