Evaluate the following statement: "Water is plentiful, therefore it can't be a scarce resource like oil which is not as plentiful."
What will be an ideal response?
The truth is that both water and oil are scarce because they are both limited in supply. The fact that water happens to be more plentiful than oil doesn't make it any less scarce of a resource.
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Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run?
A) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. B) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. C) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. D) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.
Which of the following might cause the inflation rate to spike up sharply?
(A) Prices on world oil markets rise steeply due to war in the Middle East. (B) Plentiful rainfall and moderate temperatures result in good harvests of wheat and soybeans. (C) The purchasing power of the average consumer decreases due to a sluggish economy. (D) The items in the CPI market basket change to account for changing consumer buying habits.