To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in
A) an increase in the equilibrium price of peanuts and no change in the equilibrium quantity. B) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease. C) an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease. D) an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
Economies of scale are often confused with
A) market demand curves. B) long-run average fixed cost curves. C) short-run average total cost curves. D) learning curves.
A price floor is
a. a maximum price above which the good cannot be legally bought or sold b. the lowest price buyers are willing to pay for a good. c. a minimum price below which the good cannot be legally bought or sold. d. a minimum price above which the good cannot be legally bought or sold.
Government action can usually perfectly correct the market’s shortcomings.
Answer the following statement true (T) or false (F)