Why is the price at which the quantity demanded equals the quantity supplied the equilibrium price?
What will be an ideal response?
At the equilibrium price, the quantity demanded by consumers equals the quantity supplied by producers. At this price, the plans of producers and consumers are coordinated and there is no influence on the price to move away from equilibrium.
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Mary has to choose between a four-day vacation and a five-day vacation to the same place. To arrive at the optimal choice, which optimization technique do you think will be arithmetically easier and faster to implement and why?
What will be an ideal response?
Suppose the output gap is zero, and policy makers wish to reduce the inflation rate from 10 percent to 5 percent. Which of these policies seems best?
A) contractionary policies to reduce output at least 5 percent below potential output B) a convincing declaration of the inflation rate target, so that expected inflation falls to 5 percent C) no policy action; inflation will fall on its own, eventually D) no policy action; inflation will converge to its long-run rate, regardless of policy E) price and wage controls to counteract their stickiness
Since the mid-1980s, if the Fed wanted to shift to a more expansionary monetary policy, it would
a. expand the reserves available to the banking system, which would drive down short-term interest rates. b. reduce the reserves available to the banking system, which would drive down short-term interest rates. c. expand the reserves available to the banking system, which would drive up short-term interest rates. d. reduce the reserves available to the banking system, which would drive up short-term interest rates.
Personal income taxes rise. This lowers __________, which lowers __________ and the __________ curve shifts __________
A) net exports; aggregate demand (AD); AD; leftward B) consumption; short-run aggregate supply (SRAS); SRAS; rightward C) government revenue; net exports; AD; rightward D) consumption; aggregate demand (AD); AD; leftward E) none of the above