Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause
A. a higher equilibrium price and higher equilibrium quantity of wheat.
B. a higher equilibrium quantity, but a lower equilibrium price of wheat.
C. a surplus of wheat.
D. fall in the market clearing price of corn, a substitute for wheat.
Answer: A
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Refer to Figure 5.1. All else equal, an increase in the number of workers will cause a
A) shift from PF1 to PF2. B) shift from PF2 to PF1. C) movement up and to the right along PF1. D) movement down and to the left along PF2.
If Pat's income increased from $250,000 to $500,000 and his consumption increased from $200,000 to $300,000, what was his marginal propensity to consume?
a. 0.4 b. 0.6 c. 0.8 d. 0.9
If the price of a good is below the equilibrium price,
a. suppliers will find inventories building; they will cut output and raise prices. b. suppliers will find inventories being depleted. They will increase production and raise prices. c. the demand curve will shift down until an equilibrium is established at the existing price. d. the supply curve will shift up until an equilibrium is established at the existing price.
Most economists reject the theory of rational expectations because
a. expectations adjust very quickly. b. workers receive wage increases in advance of inflation. c. the short-run aggregate supply curve is vertical. d. labor contracts tend to embody past inflation rates.