Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to
a. decrease consumption, shown as a movement to the left along a given aggregate-demand curve.
b. increase consumption, shown as a movement to the right along a given aggregate-demand curve.
c. decrease consumption, shown by shifting the aggregate-demand curve to the left.
d. increase consumption, shown by shifting the aggregate-demand curve to the right.
c
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Answer the following questions true (T) or false (F)
1. An increase in the price of inputs will cause the supply curve for a product to shift to the right. 2. All else equal, as the price of a product falls, the quantity supplied increases. 3. A decrease in the number of firms in a market will cause supply to increase.
Briefly explain what economists mean when they refer to the stock market as a random walk.
What will be an ideal response?