Why does the economy’s aggregate demand curve have a negative slope?
What will be an ideal response?
At higher price levels, the quantity of bank reserves demanded is greater. If the Fed holds the supply schedule fixed, a higher price level must therefore lead to higher interest rates. Because higher interest rates discourage investment, aggregate quantity demanded is lower when the price level is higher—that is, the aggregate demand curve has a negative slope.
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Price floors are only effective below the market equilibrium
a. True b. False Indicate whether the statement is true or false
Which of the following is an activity of government that is not an activity of private firms?
A. Enforcing involuntary transactions. B. Paying equitable wages. C. Creating positive externalities. D. Pursuing economic efficiency.
If supply decreases, the increase in price will be smaller if demand and supply are highly elastic.
Answer the following statement true (T) or false (F)
Refer to the data provided in Table 16.1 below to answer the following question(s).Table 16.1 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.Table 16.1Firm AFirm AFirm AFirm BFirm BFirm BReduction of Pollution by Firm AMC of reducing pollution for Firm ATC of reducing pollution for Firm AReduction of Pollution by Firm BMC of reducing pollution for Firm BTC of reducing pollution for Firm B1$4$41$8$82 610212203 9193163641332420565185052480Refer to Table 16.1. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, how many permits
will be traded between the two firms? A. B will buy two permits from A. B. A will buy one permit from B. C. B will buy one permit from A. D. A will buy two permits from B.