New classical economists say that a fully anticipated decrease in aggregate demand:
A. shifts the long-run aggregate supply curve to the right.
B. shifts the long-run aggregate supply curve to the left.
C. moves the economy down along its vertical long-run aggregate supply curve.
D. eventually results in a self-correcting increase in aggregate demand.
C. moves the economy down along its vertical long-run aggregate supply curve.
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Janelle spends all of her income on songs from iTunes ($1 each) and applications ($5 each) for her iTouch. At current prices, she makes her best affordable choice and purchases 20 songs and 4 applications
Suppose, for a limited time only, applications are buy-one, get-one-free and she purchases 30 songs and 4 applications. Which of the following statements is TRUE? A) For songs, the substitution effect just equals the income effect. B) For songs, the income effect is stronger than the income effect for applications. C) For applications, the substitution effect is stronger than the income effect. D) For applications, the income effect is stronger the income effect for songs.
Suppose a price ceiling is set above the equilibrium price. Now suppose that policy makers decide to raise the price ceiling. This increase in the price ceiling will cause which of the following to occur?
A) The surplus in the market will increase. B) The surplus in the market will decrease. C) The shortage in the market will increase. D) none of the above