The price of oranges rises. What happens in the market for apples, which are a substitute for oranges?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Ans: C) The equilibrium price and quantity rise.
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The economic way of thinking suggests competition and cooperation are
A) incompatible. B) mutually destructive. C) present in any society. D) only present in a capitalist market economy.
An austerity policy is
A) an increase in the money supply. B) an expenditure reduction and expenditure switching policy. C) an expansionary fiscal policy accompanied by decreases in taxes, increases in expenditures, or both. D) an exchange rate switching policy from a fixed to a flexible exchange rate system. E) None of the above.
According to the traditional (crowding-out) view, which of the following is most likely to result if a substantial portion of government expenditures is financed by borrowing rather than taxation?
a. no change in interest rates and an increase in saving b. higher interest rates and an outflow of foreign capital c. higher interest rates and a reduction in private domestic investment d. lower interest rates and an inflow of foreign investment
According to the structural stagnation hypothesis, the expansionary policy carried out by the government led to the illusion that the policies were:
A. improving U.S comparative advantages. B. effective in reducing the trade deficit. C. causing goods inflation. D. leading to long-term economic health.