Say the supply of a product falls while the demand stays the same. This causes the free market ________
price to increase and equilibrium quantity to increase
price to increase and equilibrium quantity to decrease
price to decrease and equilibrium quantity to increase
price to decrease and equilibrium quantity to decrease
price to increase and equilibrium quantity to decrease
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Starting from long-run equilibrium, a decrease in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. higher; potential D. lower; higher
Which one of the following is TRUE about the effects of fiscal policy?
A) A decrease in government spending will decrease aggregate demand. B) A tax change does not have any direct or indirect effects on aggregate demand. C) A decrease government spending will increase aggregate supply. D) An increase in government spending will reduce aggregate demand.
Nations specialize when they _____.
(A) Produce certain goods and services more efficiently than other nations. (B) Export more than they import. (C) Have few natural resources and are required to endure a trade deficit. (D) Import more than they export.
The crowding-out effect suggests that:
A. increases in government spending will close a recessionary expenditure gap. B. increases in government spending may raise the interest rate and thereby reduce investment. C. increases in consumption are always at the expense of saving. D. high taxes reduce both consumption and saving.