Use the following graph to answer the next question.
Suppose an economy is in equilibrium at its full employment output level Q2. Next, suppose the outcome of political events causes pessimism among businesses and consumers and the economy's aggregate demand shifts to AD1 (and the new equilibrium output is Q1). Excluding other events, if the government fails to implement expansionary fiscal policy, in the long run, we would expect Real GDP in the economy to
A. shift toward Q0.
B. shift past Q2 toward Q3.
C. shift back toward Q2.
D. remain at Q1.
Answer: C
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If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will
A. fall, causing households and businesses to hold more money. B. rise, causing households and businesses to hold more money. C. fall, causing households and businesses to hold less money. D. rise, causing households and businesses to hold less money.
Suppose cars are taxed according to the amount of pollution they emit per gallon of gasoline consumed. We would expect to observe all of the following EXCEPT
A) an increase in quantity demanded of less-polluting automobiles and a reduction in quantity demanded of more-polluting automobiles. B) an increase in quantity demanded of more fuel-efficient cars. C) an increase in production of automobiles that were less polluting. D) an increase in the miles driven.
A competitive firm will shut down its operations in the short run when the market price falls below its
a. marginal revenue. b. marginal cost. c. average cost. d. average variable cost.
The statement "American workers are lazy" is an example of positive economic analysis
a. True b. False Indicate whether the statement is true or false