What were the three shocks that the U.S. economy experienced during 2007-2009, and how did these shocks affect the IS curve, the MP curve, and the Phillips curve?
What will be an ideal response?
1. The U.S. economy experienced a financial crisis during this period, which increased the risk premium investors required before making loans. This resulted in an upward shift of the MP curve.
2. The U.S. economy experienced a real estate shock during this period, which reduced consumer wealth and residential construction. This resulted in a leftward shift if the IS curve.
3. The U.S. economy experienced a surge in oil prices during this period. This resulted in a leftward shift of the IS curve and an upward shift of the Phillips curve.
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The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads to
A) lower priced items and increased quantity. B) lower priced items and a decline in quantity. C) higher priced items and increased quantity. D) higher priced items and a decline in quantity.
Why is bundling of unrelated products, one of which is available in the competitive market, a losing strategy?