Suppose the economy is initially operating at point A in the above figure. Which of the following statements is TRUE?
A) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the short run.
B) An unexpected reduction in aggregate demand will cause the economy to move from point A to point C in the short run.
C) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the long run.
D) none of the above
A
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The figure above illustrates aggregate demand and aggregate supply in Sparta. Sparta's price level will rise above 100 if ________
A) government expenditure decreases B) the quantity of money increases C) the quantity of capital increases D) taxes increase
At the best affordable point, consumers equate their marginal rates of substitution to
A) their money income. B) their real income. C) relative prices. D) relative quantities.
Monopolistic competition describes a market with:
A. few firms that sell goods and services and some barriers to entry. B. many firms that sell goods and services that are standardized. C. many firms that sell goods and services that are similar, but slightly different. D. few firms that sell goods and services that are standardized.
In the long run, a year-long drought that destroys most of the summer's wheat crops causes permanently:
A. higher prices. B. lower prices. C. lower output. D. None of these is true.