Competency 4 C211
Equilibrium price and quantity are, respectively,
$25 and 400 units
At what price would there be an excess supply of 200 units of the good?
$30
Which of the following both increase the money supply?
A decrease in the discount rate and a decrease in the interest rate on reserves
When we move along a given demand curve,
All nonprice determinants of demand are held constant
Which of the following would shift the demand curve for gasoline to the right?
An increase in consumer income, assuming gasoline is a normal good.
Which of the following events shifts aggregate demand rightward?
An increase in government expenditures, but not a change in the price level.
The shift from S to S' is called
An increase in supply
Which of the following is not a function of money?
Protection against inflation
If the Federal Reserve decided to rase interest rates, it could...
Sell bonds to lower the money supply
Which of the following is NOT an example of monetary policy?
The Federal Reserve facilitates bank transactions by clearing checks.
The federal open market committee is
The group at the federal reserve that sets money policy.
The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output. This type of effect on spending illustrates...
The multiplier effect
Which of the following is not a determinant of the price elasticity of demand for a good?
The steepness or flatness of the supply curve for the good.
The movement from point A to point B on the graph is caused by
a decrease in price
If the demand for a good falls when income falls, then the good is called
a normal good
If a surplus exists in a market, then we know that the actual price is
above the equilibrium price, and quantity supplied is greater than quantity demanded.
The shift from Da to Db in the market for potato chips could be caused by
an increase in the price of a pretzels.
The movement from point A to point B on the graph is called...
an increase in the quantity supplied
If the demand for a product increases, then we would expect equilibrium price
and equilibrium quantity both to increase
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
Monetary policy affects the economy with a long lag, in part because
changes in interest rates primarily influence investment spending, and firms make investment plans far in advance.
If the public decides to hold more currency and fewer deposits in banks, bank reserves
decrease and the money supply eventually decreases
An increase in the price of a good will...
decrease quantity demanded
Suppose there was a large increase in net exports. If the Fed wanted to stabilize output, it could
decrease the money supply, which will increase interest rates.
Equilibrium quantity must decrease when demand
decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
Two goods are substitutes when a decrease in the price of one good...
decreases the demand for the other good
For which of the following goods is the income elasticity of demand likely highest?
diamonds
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the
flatter the demand curve will be.
Fiscal policy affects the economy
in both the short and long run
The multiplier effect states that there are additional shifts in aggregate demand from expansionary fiscal policy, because it...
increases income and thereby increases consumer spending.
Two goods are complements when a decrease in the price of one good
increases the demand for the other good.
Other things the same, if reserve requirements are increased, the reserve ratio
increases, the money multiplier decreases, and the money supply decreases.
The Federal Reserve
is the central bank of the United States
For which pairs of goods is the cross-price elasticity most likely to be positive?
pens and pencils
When there is an excess supply of money
people will try to get rid of money causing interest rates to fall. Investment increases.
A demand schedule is a table that shows the relationship between
price and quantity demanded
The market demand curve
represents the sum of the quantities demanded by all the buyers at each price of the good.
The law of supply states that, other things equal, when the price of a good
rises, the quantity supplied of the good rises
The quantity supplied of a good is the amount that
sellers are willing and able to sell
When conducting an open-market sale, the Fed
sells government bonds, and in so doing decreases the money supply
Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are
substitute goods
At a price of $35, there would be a
surplus of 400 units
For a good that is a luxury, demand
tends to be elastic
If the number of buyers in a market decreases, then
the demand will decrease
The discount rate is
the interest rate the Fed charges banks
Which of the following events would cause a movement upward and to the left along the demand curve for olives?
the price of the olives rises
Cross-price elasticity of demand measures how
the quantity demanded of one good changes in response to a change in the price of another good.
A key determinant of the price elasticity of supply is the
time horizon.
