Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward
B. Short-run aggregate supply shifting downward
C. Aggregate demand shifting rightward
D. Aggregate demand shifting leftward
Answer: B
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Monopolistically competitive firms
A) have market power because they can set price above marginal cost. B) have no market power because they earn zero economic profit. C) have no market power because of free entry. D) have no market power because price equals marginal cost.
Flexible exchange rates:
A. impose a greater degree of discipline on the behavior of central banks than fixed exchange rates do. B. make it simpler to engage in international trade than fixed exchange rates do. C. give governments a greater degree of flexibility in monetary policy than fixed exchange rates do. D. produce smaller exchange rate fluctuations than fixed exchange rates do.
Recall the Application about how a simultaneous increase in the gasoline tax and decrease in the income tax affect gasoline consumption to answer the following question(s).Recall the Application. Suppose a tax on carbon that increases the price of gasoline is combined with a cut in income taxes to ensure that total tax revenue collected by the government does not change. This tax policy has no ________ but has ________.
A. income effect; a substitution effect. B. income effect; a positive real effect. C. no real effect on consumption; an income effect. D. substitution effect; an income effect.
Consumers do not have a strong preference for the output of one seller over that of another in a perfectly competitive market because:
A. there a large number of firms in the market. B. the firms sell a standardized product. C. there are no barriers to entry. D. an individual firm has control over price.