Explain how the combination of major changes in the weather and price inelasticity of demand for a food item can lead to wide fluctuations in a farmer's income from year to year
Major changes in the weather can impact the supply of an agricultural product. If the weather is favorable, the supply curve for the crop will shift to the right, lowering the price of the crop. If the weather is unusually bad, the supply curve for the crop will shift to the left, raising the price of the crop. In addition, if demand for the product is inelastic, then quantity demanded will not change very much in relation to any given price change. Thus, if unusually good weather leads to a large decrease in the price of the crop, the quantity demanded will not change by a very large percentage, and the farmer's total revenue will drammatically decrease. On the other hand, if unusually bad weather raises the price of the crop substantially, there will be a relatively small decrease in quantity demanded, and the farmer's total revenue will drammatically rise.
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Economic growth is a sustained expansion of production possibilities, as measured by the increase in ________ over time
A) population B) inflation C) the price level D) real GDP E) employment
Suppose the Fed conducts an open market purchase of bonds. This monetary policy action will tend to cause
A) the price of bonds to increase, and the interest rate to increase. B) the price of bonds to increase, and the interest rate to decrease. C) the price of bonds to decrease, and the interest rate to increase. D) the price of bonds to decrease, and the interest rate to decrease.