There is an increase in aggregate demand, and firms do not have sufficient capital and labor to support an output increase. In this case, inventory stocks will
A. continue to increase, and there will be a large increase in the price level.
B. continue to fall, and the price level will fall.
C. continue to fall, and there will be a large increase in the price level.
D. remain unchanged, and the price level will remain unchanged.
Answer: C
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For this question, ignore tax considerations of each of the following. Assume that consumption decisions are made according to the permanent income theory. Which of the following would lead to the smallest increase in current consumption?
A) winning $10,000 in the lottery B) inheriting $10,000 from a relative C) obtaining $10,000 by winning a lawsuit D) getting a one-time $10,000 bonus from your employer E) all of the above
This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade. They both will enjoy a higher grade when more effort is put into the project, but they also get pleasure from goofing off and not working on the project. The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.According to the figure shown, if Sarah puts forth low effort, then Joe should:
A. put forth high effort. B. give an ultimatum. C. put forth low effort. D. leave the market.