Starting from a pure exchange equilibrium, an increase in the demand for a commodity will result in:
a. a fall in the market price.
b. a rise in the market price.
c. a rise in the equilibrium output.
d. a fall in the equilibrium output.
B
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When indifference curves are bowed in toward the origin,
a. consumers are more inclined to trade away goods they have in abundance. b. an increase in income will shift the indifference curve away from the origin. c. a decrease in income will shift the indifference curve toward the origin. d. Both b) and c) are correct.
In the above figure, suppose the economy is in equilibrium at point A. The Fed engages in an expansionary monetary policy that is fully anticipated by the public. Other things being equal, what point represents the new equilibrium according to the rational expectations theory?
A. A B. B C. C D. D