Why do fads often lead to shortages, at least in the short term?
A. Demand increases too quickly and unexpectedly for the supply to keep up.
B. Laws prevent stores from responding to excess demand in time to prevent a shortage.
C. Buyers and sellers are unable to agree on a price for the good.
D. Manufacturers charge such high prices for the goods that stores are unwilling to pay.
Ans: A. Demand increases too quickly and unexpectedly for the supply to keep up.
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The short-run aggregate supply curve in modern Keynesian analysis represents the relationship between
A) the real output of goods and services in the economy and the price level when people have fully adjusted their behavior. B) the nominal output of goods and services and the real output of goods and services. C) the real output of goods and services in the economy and the price level. D) the real output of goods and services in the economy and the price level when people have not fully adjusted their behavior.
Based on the model of the money market, if prices in the economy decrease, the equilibrium interest rate should
A) stay the same. B) increase. C) decrease. D) increase to the same extent that the supply of money increases.