How can an event such as the terrorist attacks of September 2001 affect consumer and business confidence and the economy?
What will be an ideal response?
Any situation that makes people feel vulnerable or scared, such as the terrorist attacks, causes a decrease in consumer and business confidence. A decrease in confidence causes individuals to spend less. This causes a decrease in aggregate demand. With less demand for goods and services in the product markets, workers are laid off, incomes decrease, and the multiplier process begins to make the economy even worse.
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Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the market price is $21. Which of the following statement is true?
A) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25. B) There is a shortage that will cause the price to increase; quantity supplied will then decrease and quantity demanded will increase until the price equals $25. C) There is a shortage that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25. D) There will be a shortage that will cause the price to increase; demand will then decrease and supply will increase until the price equals $25.
The difference between accounting profit and economic profit relates to
a. the manner in which revenues are defined. b. how marginal revenue is calculated. c. the manner in which costs are defined. d. the price of the good in the market.