Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C)
If the price of motorcycle side cars (a complement to motorcycles) decreases, and the wages of motorcycle workers increase, how will the equilibrium point change?
A) The equilibrium point will move from C to A.
B) The equilibrium point will move from C to B.
C) The equilibrium will first move from C to A, then return to C.
D) The equilibrium point will move from C to E.
B
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Which of the following is true of cyclical unemployment?
A) Cyclical unemployment increases during periods of economic boom. B) Cyclical unemployment is the deviation of unemployment from its natural rate. C) Cyclical unemployment is also known as frictional unemployment. D) Cyclical unemployment decreases during periods of economic boom.
High budget deficits may:
a. encourage overly expansionary fiscal policy. b. create higher inflation. c. increase the risk of sovereign debt default. d. all of the above.