Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the long run would be:
A. P1 and Y2.
B. P2 and Y2.
C. P3 and Y1.
D. P2 and Y3.
Answer: D
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In the two-country model of the Monetary Approach, the spot exchange rate is determined by
A) the relative quantities of money supplied and demanded. B) the real money stock in country A vs. country B. C) the nominal incomes in the two countries. D) the ratio of prices in the economies.
The seller of an existing house claims that it is in great shape, and he is offering a 2-year warranty on the house. His statements about the quality of his house are likely to be:
A. overstated. B. true because offering a warranty is a costly-to-fake signal. C. credible even in the absence of a warranty. D. untrue because otherwise he would not offer the warranty.
Which of the following will result in secular deflation?
A. continuous rightward shifts of the long-run aggregate supply curve B. a one-time rightward shift of the long-run aggregate supply curve C. continuous rightward shifts of the aggregate demand curve D. a one-time rightward shift of the aggregate demand curve
How do rationally ignorant voters and budget maximizing bureaucrats prevent the political marketplace from delivering the efficient quantity of a public good?
What will be an ideal response?