A negative demand shock would lead to a decline in both the price level and output in
the short run.
After John’s income rose by 8 percent, the amount of chicken he consumed fell by 2
percent. This means that
In comparing long-run and short-run costs, which of the following statements is true at
each level of output?
While tax cuts may increase productivity, the government is forced to redistribute the
tax burden or cut its own spending.
The Fed’s open market operations involve
a. buying and selling of government bonds
b. changes of the discount rate
c. setting the required reserve ratio
d. buying and selling corporate bonds
e. a policy of last resort used to avert a financial crisis
Figure 5-1 shows the prices of two services offered by Earl’s Barber Shop and the
resulting quantities demanded by customers. In this example, the price elasticity of
demand for haircuts (using the midpoint formula) is
If the price level is increasing and output is falling, which of the following could be the
reason?
a. A negative demand shock
b. A positive supply shock
c. A positive supply shock combined with a positive demand shock
d. A negative supply shock
e. A positive demand shock
Variable costs are
More enjoyable professions tend to enjoy compensating wage differentials.
The demand curve facing a monopolistic competitor is
When households and businesses interact in product markets resources are
An example of a service counted in this year’s GDP is
a. buying shampoo to give your pet a bath
b. cleaning your house
c. trimming your own hair
d. hiring a gardener to weed your garden
e. polishing your friend’s car as a friendly gesture
Price elasticity of supply
Which of the following would best encourage investment in human capital?
a. Higher marginal tax rates on labor income
b. Higher interest rates
c. Expansion of college loan programs
d. A decrease in the wage gap between high school and college-educated workers
e. A reduction in life expectancy that encourages earlier retirement
An increase in buyers’ incomes
A shift in the production possibilities frontier from DC to EC in Figure 2-6 could be
due to a
Figure 2-6
Which of the following is most sensitive to fluctuations in GDP?
a. government purchases
b. government nonmilitary spending
c. transfer payments
d. military spending
e. interest on the national debt
If a monopolistically competitive firm raises its price,
The labor supply curve is obtained by