Figure 5-13
In Figure 5-13, the consumer is better off
a.
at A than at E.
b.
at B than at D.
c.
at any point on U2 than at any point on U1.
d.
All of the above are correct.
c
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Crowding out will be greater
A) if the economy is in recession, rather than at full employment. B) the further equilibrium GDP is below potential GDP. C) the less sensitive consumption spending is to changes in the interest rate. D) the more sensitive investment spending is to changes in the interest rate.
If the Fed wants to raise interest rates, then it can use its open market operations to:
a. increase the money supply. b. decrease the money supply. c. increase money demand. d. decrease money demand.
When people’s income increases, demand for science fiction novels increases. The novels are
a. an inferior good. b. substitutes. c. a normal good. d. regular goods.
Refer to the diagram. The initial aggregate demand curve is AD 1 and the initial aggregate supply curve is AS 1 . If government offsets the decline in real output resulting from short-run cost-push inflation by increasing aggregate demand from AD 1 to AD 2
A. real output will rise above Q f .
B. the price level will rise from P 1 to P 2 .
C. it is possible that aggregate supply will shift rightward from AS 2 because nominal wage
demands will rise.
D. the price level will rise from P 2 to P 3 .