Consumer surplus is
a. the amount by which quantity supplied exceeds quantity demanded at the current market price
b. the amount by which quantity demanded exceeds quantity supplied at the current market price
c. the change in total utility derived from a one-unit change in the consumption of a good
d. the difference between the price of the good paid by the consumer and the costs of production to the seller
e. the difference between the maximum amount that a consumer is willing to pay for a given amount of a good and the amount that the consumer actually pays
E
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When would it be plausible to describe the demand for a product by drawing a straight line, Q = a - bP?
A. Only if no important factors other than price affect demand B. In the vast majority of scenarios C. Practically never D. If we believe that factors other than price alone determine demand
The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should
A) buy government securities and thereby increase aggregate supply. B) sell government securities and thereby decrease aggregate demand. C) buy government securities and thereby decrease aggregate demand. D) buy government securities and thereby increase aggregate demand. E) sell government securities and thereby increase aggregate demand.