When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:
A. output, causing it to definitely decrease.
B. output, causing it to definitely increase.
C. prices, causing them to definitely rise.
D. prices, causing them to definitely fall.
A. output, causing it to definitely decrease.
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Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the
horizontal axis of the money demand curve. What will be an ideal response?
Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900.The clear outcome of this game is that:
A. neither Joe nor Sam will cut his price. B. Sam will cut his price and Joe won't. C. both Joe and Sam will cut their price. D. Joe will cut his price and Sam won't.