The shapes of the curves in the AS/AD model are based upon the:
A. principle of opportunity cost.
B. relationship between the price level and total output.
C. principle of substitution.
D. relationship between a single good and its price.
Answer: B
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How can long run values in the real exchange rate change?
What will be an ideal response?
Why do some policymakers support a consumption tax rather than an earnings tax?
a. The average tax rate would be lower under a consumption tax. b. A consumption tax would encourage people to save earned income. c. A consumption tax would raise more revenues than an income tax. d. The marginal tax rate would be higher under an earnings tax.
Suppose that the federal government imposes a price floor (support price) in the milk market at a price of $3 per gallon. If market quantity demanded at $3 is 1 billion gallons, and if market quantity supplied is 1.5 billion gallons, then which of the following is true?
a. There is a surplus of 1 billion gallons of milk, and the federal government will buy 1.5 billion gallons to maintain the $3 price. b. There is a shortage of 500 million gallons of milk, and the federal government will buy 1 billion gallons to maintain the $3 price. c. There is a shortage of 500 million gallons of milk, and the federal government will buy an additional 500 million gallons to maintain the $3 price. d. There is a surplus of 500 million gallons of milk, and the federal government will buy this 500 million gallons to maintain the $3 price.
An increase in demand will cause
a. an increase in supply. b. a decrease in quantity supplied. c. a decrease in supply. d. a decrease in equilibrium price. e. an increase in quantity supplied.