Consider a downward-sloping demand curve. When the price of an inferior good increases, the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions and quantity demanded increases.
D) work in opposite directions and quantity demanded decreases.
D
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An attempt by a central bank to alter the money supply by buying or selling domestic assets
A) will leave both domestic money supply and foreign reserves unchanged. B) will cause an offsetting change in aggregate demand. C) will lead to a rise in domestic employment and output. D) will lead to a decrease in domestic employment and output. E) will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged.
An economy in which output has decreased and prices have decreased would suggest a:
A. decrease in short-run aggregate supply. B. increase in aggregate demand. C. increase in short-run aggregate supply. D. decrease in aggregate demand.