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. prices, causing them to definitely rise.
C. output, causing it to definitely increase.
D. prices, causing them to definitely fall.
Answer: A
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The market power of a firm refers to its ability to
A) erect entry barriers in the industry. B) make a profit even when other firms in the industry are making losses. C) control its own output level while keeping its price the same as the prices charged by other firms. D) affect the market price for its industry's output.
Figure 32-2
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Suppose that Figure 32-2 shows the effects of reducing the budget deficit by raising taxes. If authorities do not want real GDP to fall, monetary policy must
A. become sufficiently more expansionary to restore the aggregate demand curve to D0D0. B. contract aggregate demand to be consistent with deficit-reducing fiscal policy. C. not lower interest rates and thwart the goal of a balanced budget. D. become more contractionary to lower the interest rate and spur investment.