When aggregate demand decreases, product prices, wage rates, and per-unit production costs are inflexible downward because of a:
A. interest-rate effect.
B. ratchet effect.
C. real-balances effect.
D. foreign-purchases effect.
Answer: B
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Changes in aggregate demand
A) could be caused by changes in the spending decisions of the households, businesses, the government, and foreigners. B) are very uncommon. C) are unlikely to change quickly in response to economic events. D) are primarily based on changes in firms' abilities to produce products. E) are not affected by changes in government policies.
Exclusive rights of ownership that allow the use, transfer, and exchange of property are called
A) common property rights. B) nonexclusive property rights. C) private property rights. D) public property rights.
If firms are producing at a profit-maximizing level of output where the price is equal to the average total cost:
A. economic profits must be zero. B. average total cost must be minimized. C. accounting profits must be positive. D. All of these are true.
Which of the following policies would be advocated by proponents of stabilization policy when the economy is experiencing severe unemployment?
a. a decrease in the money supply b. an increase in tax rates c. an increase in government purchases d. an increase in interest rates.