In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD3, then the new short-run equilibrium will be at point
A. a.
B. b.
C. c.
D. i.
Answer: C
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Everything else held constant, an increase in the interest rate paid on checkable deposits will cause ________ in the amount of checkable deposits held relative to currency holdings and ________ in the currency ratio
A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease
Suppose an entrepreneur commits to a production schedule but underestimates the market price for his products. What will be true about his current level of production?
a. Losses will be very high. b. Marginal cost will be less than marginal revenue. c. Marginal cost will be more than marginal revenue. d. Average total cost will exceed price. e. Total fixed costs will be too low.
Suppose that monopolistically competitive firms in a certain market are experiencing losses. In the transition from this initial situation to a long-run equilibrium,
a. the number of firms in the market decreases. b. each existing firm experiences a decrease in demand for its product. c. each firm experiences an upward shift of its marginal cost and average total cost curves. d. each existing firm's average total cost falls to bring economic profit back to zero.
The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the
A) price of furniture will increase the quantity of furniture demanded by 1.3 percent. B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent. C) quantity of furniture demanded will decrease the price of furniture by 1.3 percent. D) quantity of furniture demanded will increase the price of furniture by 1.3 percent.