In a binding situation, a positive cost shock will cause ________ in output and ________ in the price level.
A. no change; no change
B. a decrease; no change
C. no change; an increase
D. a decrease; an increase
Answer: C
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The relative price of a good is greater than the money price of a good
Indicate whether the statement is true or false
The primary benefit of the automatic stabilizers is:
a. they provide public assistance through legislative decision making b. they require no new legislative action, so there is no legislative lag before these tools respond to fluctuations in the business cycle. c. they require legislative action, so there is a lag in response to these tools to fluctuations in the business cycle, and there is time to identify the spillover effects. d. none of the above.
Which of the following statements about the income effect of a price change is NOT true?
A. It affects consumption by removing compensation. B. It always involves a parallel shift in the budget line. C. It isolates the influence of a change in relative prices. D. It reflects the fact that a price change affects a consumer's purchasing power.
If the reserve requirement is 20 percent and a new deposit of $10,000 in cash is made by a customer to their checking account, by how much are excess reserves increased?
A. $10,000 B. $8,000 C. $4,000 D. $2,000