Suppose that the market for coffee is in equilibrium at a price of $9.50 per pound and a monthly quantity of 20 million pounds. News of a drought in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced
What, if anything, will happen in the coffee market now? Explain.
What will be an ideal response?
The expectations of reduced supplies and higher prices in the future will cause current demand to increase and the market clearing price to rise.
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If aggregate planned expenditure is greater than GDP, then
A) the consumption function will shift downward to restore the equilibrium. B) a recession will result. C) inventory investment is larger than planned. D) production is too high. E) inventory investment is smaller than planned.
Suppose that an economy's labor productivity fell by 3 percent and its total worker-hours remained constant between year 1 and year 2. We could conclude that this economy's:
A. real GDP declined. B. capital stock increased. C. production possibilities curve shifted outward. D. actual production moved from one point to another on a fixed production possibilities curve.