According to this Application, the policies used by the European Union to support the agricultural sectors of its member countries created excess supply. Excess supply can be generated if a government establishes a
A) price ceiling above the market equilibrium price.
B) price ceiling below the market equilibrium price.
C) price floor above the market equilibrium price.
D) price floor below the market equilibrium price.
C
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When the policy rate increases,
A) IS curve does not change. B) IS curve shifts to the right. C) IS curve shifts to the left. D) LM curve shifts upward. E) LM curve shifts downward.
Suppose leisure is on the horizontal axis and dollars are on the vertical axis in the consumer-choice diagram. What happens to the budget line when a head tax is imposed?
a. The budget line shifts inward, but it may become steeper or flatter depending on the size of the head tax.
b. The budget line pivots about the horizontal intercept, becoming steeper.
c. The budget line become flatter, with the vertical intercept falling and the horizontal intercept remaining fixed.
d. There is an inward, parallel shift in the budget line.