Suppose that the market for coffee is in equilibrium at a price of $9.50 per pound and a monthly quantity of 20 million pounds. News of a drought in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced
What, if anything, will happen in the coffee market now? Explain.
The expectations of reduced supplies and higher prices in the future will cause current demand to increase and the market clearing price to rise.
Economics
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According to the Keynesian view of aggregate supply, an increase in the money supply will:
A. Always cause inflation. B. Cause inflation if the economy is at full employment. C. Cause inflation only if aggregate supply is horizontal. D. Never cause inflation.
Economics
A firm's stock price will be higher when the interest rate is ____ and the value of the firm's expected future profits are ____
a. lower; larger b. lower; smaller c. higher; larger d. higher; smaller
Economics