One explanation for the slope of the aggregate demand curve is that:
a. nominal income falls and so does the demand for goods and services as prices rise.
b. falling prices make people feel poorer and reduce spending.
c. the government spends less to drive the price level back to normal as prices rise.
d. businesses increase spending when inflation is high and rising.
e. domestic goods become more expensive relative to foreign goods when prices rise, reducing exports.
QUESTION 2Assume that an oligopolist has a kinked demand curve. Suppose that the marginal cost curve passes through the gap in the marginal revenue curve. This means price and output will be shown by a point:
a. above the curve.
b. below the curve.
c. at the kink
d. on the upper part of the curve.
e. on the lower part of the curve.
QUESTION 3In the short run, a firm will eventually experience rising per-unit costs because of:
a. economies of scale.
b. diseconomies of scale.
c. the law of supply.
d. the law of diminishing returns.
QUESTION 4Which of these is a likely consequence of an increase in the price level in the economy, other things constant?
a. Firms demanding less imported raw materials
b. Government demanding less military hardware
c. Foreigners demanding greater amount of U.S. goods
d. Households demanding more housing and furniture
e. Firms demanding more capital resources
QUESTION 5For a kinked demand curve, the marginal revenue curve is:
a. positively sloped.
b. a horizontal line.
c. a vertical line.
d. discontinuous.
e. above the demand curve.
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