Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result
A) workers will be willing to take lower wages next year, but not lower than a 2.5 percent decrease.
B) the purchasing power of wages will rise if wages increase by 2.5%.
C) the short-run aggregate supply curve will shift to the left as wages increase.
D) aggregate demand will increase by 2.5%.
Answer: C
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Are markets always in equilibrium?
A. Yes, they are always at the equilibrium point, or very close to it. B. Yes, because few things tend to alter supply and demand. C. No, but if there is no interference, they tend to move toward equilibrium. D. No, they never “settle down” into a stable price and quantity. E. Uncertain, economic theory has no answer to this question.
This profit-maximizing (loss-minimizing) firm is making a profit or loss of about __________.
A. $480
B. $500
C. $800
D. -$450
Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that
A. the former is built into the system, whereas the latter requires timely decisions. B. the former requires timely decisions, whereas the latter is built into the system. C. the former deals with interest rates, and the latter deals with tax policy. D. the former deals with tax policy, and the latter deals with interest rates.
Refer to the following graph.
Elasticity is greatest at point:
A. A. B. B. C. C. D. It is the same everywhere along this supply curve.