How does the aggregate demand curve differ from a demand curve for, say, bananas?
What will be an ideal response?
The demand for bananas expresses the quantities that people are willing to buy at various prices. The aggregate demand curve indicates the level of output that is produced when the goods market is in equilibrium at various rates of inflation. The demand for bananas arises from consumer preferences, while the aggregate demand curve arises from monetary policy and the sensitivity of expenditures to the real interest rate.
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Monetary expansion causes the current account balance to increase in the short run. Discuss. Is the same the case for fiscal expansion?
What will be an ideal response?
As the economy recovers from a recession, we should expect that demand for:
a. inferior goods will fall and demand for non-inferior goods will rise. b. all goods will rise. c. inferior goods will rise and demand for non-inferior goods will fall. d. all goods will fall. e. complements will fall.
Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective, a. a smaller quantity of the good is exchanged. b. a smaller quantity of the good is demanded. c. a larger quantity of the good is supplied
d. the price rises above the previous equilibrium.
The slope of a production possibility frontier shows the _____
a. total cost of producing a good b. opportunity cost of expanding production of one good c. price of the good produced along the horizontal axis d. total resources available in the economy