After a temporary adverse supply shock hits the economy, general equilibrium is restored by
A. a shift up and to the left of the LM curve.
B. a shift to the left of the FE line.
C. a shift down and to the left of the IS curve.
D. a shift down and to the right of the IS curve.
Answer: A
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A long-term mismatch between the skills of some workers and the jobs available is a principal cause of ________ unemployment.
A. structural B. cyclical C. frictional D. global
Excess capacity in monopolistically competitive industries results because in equilibrium
A) each firm's output level is too great to minimize average cost. B) each firm's output level is too small to minimize average cost. C) firms make positive economic profit. D) price equals marginal cost.
A reduction in aggregate demand will normally reduce
a. prices. b. real GDP. c. employment. d. All of the above are correct.
Two farmers, A and B, each apply 100 tons of manure on their fields. To reduce manure runoff, the government has decided to require a permit for each ton of manure applied. The government gives each farmer 50 tradeable permits. Farmer A incurs losses of $25 for each ton of manure he does not apply, and Farmer B incurs losses of $50 for each ton of manure he does not apply. After permit trading,
we would expect that a. farmer A will no longer apply manure, and farmer B will not reduce his manure application at all. b. farmer B will no longer apply manure, and farmer A will not reduce his manure application at all. c. farmer A and B will each apply 50 tons of manure. d. farmer A will apply 25 tons of manure, and farmer B will apply 50 tons of manure.