Assume that consumers consider rice and potatoes to be substitutes, so that when the price of rice rises, consumers purchase less rice and more potatoes. When the CPI is computed following the increase in the price of rice, it takes into account
a. the increase in the price of rice.
b. the decrease in the quantity of rice purchased and the increase in the quantity of potatoes purchased.
c. Both (a) and (b) are correct.
d. None of the above is correct.
a
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If the interest rate is above the equilibrium interest rate, then
A) there is an excess demand for money. B) the quantity of money demanded exceeds the quantity supplied. C) people will sell bonds and the interest rate will fall. D) people will buy bonds and the interest rate will fall.
Suppose households decide to reduce savings because they want to enjoy more present time than future time. In this case, the loanable funds model predicts that
A) interest rate goes down, and quantity of borrowed funds increases. B) interest rate goes down, and quantity of borrowed funds decreases. C) interest rate goes up, and quantity of borrowed funds decreases. D) interest rate goes up, and quantity of borrowed funds increases.
An oligopolist charges a lower price than the short-run profit-maximizing price. Which newcomers would this action most likely stop from entering the market?
a. those with costs higher than P 1
b. those with costs at P 1
c. those with costs between 0 and P 1
d. those with costs less than ATC
A decrease in marginal tax rates will cause entrepreneurship to ________ and AS to shift to the ________.
A. decrease; right B. increase; left C. decrease; left D. increase; right