Refer to the above figure. Assume that B is the current long-run aggregate supply (LRAS) curve and that E is the current short-run aggregate supply (SRAS) curve
If a new discovery of large oil fields in Florida led to an increase in the nation's productive capacities, then we could expect the LRAS curve and the SRAS curve to A) remain B and E.
B) move to A and D.
C) move to C and F.
D) move to A and F.
C
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Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?
A) "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit." B) "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower." C) "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming." D) "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!"
In Figure 3-7 above, the multiplier effect does NOT explain
A) the increase in equilibrium income. B) the increase in induced saving. C) the increase in AP. D) all of the above.