An economy in which output has decreased and prices have increased would suggest that there has been a:
A. negative demand side shock.
B. negative supply side shock.
C. positive demand side shock.
D. positive supply side shock.
Answer: B
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In the four-sector circular flow model, households will use their incomes to do all but which one of the following?
a. Save. b. Pay taxes. c. Buy domestic goods and services. d. Buy imported goods and services. e. Invest.
Pepsi One is a close substitute for Diet Coke. When Pepsi introduced Pepsi One, the price elasticity of demand for Diet Coke ________ and Coke's ability to raise revenues through price increases ________.
A. decreased; was reduced B. had no effect; was reduced C. increased; was reduced D. increased; increased
GDP and GNP are identical when
a. exports and imports exactly balance. b. all domestic production is by domestically owned producers and no foreign production is carried out by domestic producers. c. production by domestic producers in other countries is greater than production by foreign producers domestically. d. there are no taxes.
It is costly to hold money because
A. deflation may reduce its purchasing power. B. in doing so one sacrifices interest income. C. bond prices are highly variable. D. the velocity of money may decline.