To test the theory that if the price of pens rises, then pen purchases fall, an economist would
A. collect data on the price of pens and the price of pencils because the two goods are substitutes.
B. investigate whether people purchase more pens when their income rises.
C. analyze data on pen purchases linked to the price of pens, holding other factors constant.
D. ask his or her friends if they would buy fewer pens when the price rises.
Answer: C
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If we start from long-run general equilibrium of goods, forex, and the money markets, and there is a temporary expansion of the money supply, what will be the outcome?
A) GDP rises, the interest rate falls, and the exchange rate rises (depreciation). B) GDP rises, the interest rate rises, and the exchange rate falls (appreciation). C) GDP falls, the interest rate falls, and the exchange rate rises (depreciation). D) GDP falls, the interest rate rises, and the exchange rate rises (depreciation).
The primary difference between the aggregate demand curve and an individual demand curve is that
A. the aggregate demand curve represents total planned expenditures on all goods and services while an individual demand curve represents a single good or service. B. a change in the price level will shift the aggregate demand curve but not an individual demand curve. C. the aggregate demand curve is vertical in the long? run, while an individual demand curve is downward sloping. D. a change in real balances will shift an individual demand curve but not the aggregate demand curve.