A negative supply shock causes ________ to ________
A) aggregate demand; increase
B) aggregate demand; decrease
C) short-run aggregate supply; decrease
D) short-run aggregate supply; increase
C
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In the long run, higher government budget deficits will
A) lead to a redistribution of real GDP from privately produced goods and services to government produced goods and services. B) lead to a redistribution of real GDP from government produced goods and services to privately produced goods and services. C) cause the price level to go down on government goods but not on private goods. D) lead to a reduction in the amount of goods and services produced by the government and private sector.
Answer the following statements true (T) or false (F)
1. If the price that a firm charges is higher than its average cost of production for that quantity produced, then the firm will earn profits. Conversely, if the price that a firm charges is lower than its average cost of production, the firm will suffer losses. 2. When a firm earns losses because it does not make enough revenue to offset the increased variable costs plus fixed costs, it should remain open in the short run. 3. For a constant cost industry, whenever there is an increase in market demand and price, the supply curve shifts to the right with new firms’ entry and stops at the point where the new long-run equilibrium intersects at the same market price as before. 4. The fact that perfectly competitive markets are the most usual type of market supports the statement that, in the long run, markets will feature both productive and allocative efficiency. 5. A natural monopoly occurs when a company has control of a scarce physical resource.
If the self-correcting mechanism operates quickly,
a. direct intervention is less necessary to close a recessionary gap. b. fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. c. monetary policy is far more useful in closing a recessionary gap than fiscal policy. d. fiscal stimulus is ineffective and inflation will occur.
The law of diminishing returns indicates that:
A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.