According to the misperceptions theory, when the price level falls below the expected price level,
A. the economy's SRAS curve shifts up.
B. the economy moves along its AD curve.
C. the economy moves along its SRAS curve.
D. the economy moves along its LRAS curve.
Answer: C
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When comparing a $100 billion increase in government expenditure to a $100 billion decrease in tax revenue, the effect of the increase in government expenditure on aggregate demand is
A) greater than the effect of the tax decrease. B) equal to the effect of the tax decrease. C) less than the effect of the tax decrease. D) positive whereas the effect of the tax decrease is negative. E) negative whereas the effect of the tax decrease is positive.
If a typical firm in a perfectly competitive industry is incurring losses, then
A) some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms. B) some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms. C) some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms. D) all firms will continue to lose money.