Economics Answers

“Inflation is always and everywhere a monetary phenomenon”. Discuss.

Discuss the Real Business Cycle model. Does the global economic crisis of 2007-09

support this model?

Critically analyze the New Keynesian approach to explain business cycles.

“According to New Keynesians small nominal rigidities have large macroeconomic effects”. Discuss the above statement.

Suppose we observe that the equilibrium price of a particular good has decreased significantly over the past 5 years, with virtually no change in the equilibrium quantity. Which of the following is the most likely explanation? Over the past 5 years:

A. both supply and demand have decreased.

B. supply has increased but demand has decreased

C. both supply and demand have increased

D. demand has increased but supply has decreased.

Suppose that equilibrium price in this market were to remain at P2 while equilibrium quantity increases from Q2 to Q4. Which of the following could account for such a change?

1.an increase in income, assuming this is a normal good.

2.an increase in the price of a complement combined with an increase in the price of a factor of production.

3.an increase in the price of a substitute combined with a technological innovation reducing production costs.

4.an increase in the price of a complement combined with a decrease in the price of a factor of production

Suppose that equilibrium quantity in a market were to remain at Q2 while equilibrium price increases from P2 to P1. Which of the following could account for such a change?

1.an increase in the price of a substitute combined with a technological innovation reducing production costs.

2.a decrease in the price of a substitute combined with a technological innovation reducing production costs.

3.an increase in the price of a complement combined with a decrease in the price of a factor of production.

4.a decrease in the price of a complement combined with an increase in the price of a factor of production.

Celia is a potato peeler for CanCan Foods. She decides to quit her job and instead work as a seamstress at CoverUp Clothing. This would cause:

1.a movement along the production possibilities curve.

2.a movement towards a point that is outside the PPC

3.an outward shift of the production possibilities curve.

4.an inward shift of the production possibilities curve.

Consider a production possibilities curve with maize on the vertical axis and cars on the horisontal. Unusually good weather for growing maize shift:

1.neither the horisontal intercept nor the vertical intercept.

2.the horisontal intercept rightward and the vertical intercept upward.

3.the horisontal intercept rightward but does not shift the vertical intercept.

4.the vertical intercept upward but does not shift the horisontal intercept.

The market for drones has undergone some changes over the past two years. As a result of these changes, the equilibrium quantity of drones has increased substantially with almost no change in the equilibrium price. Which of the following is the most likely explanation for these changes? Over the past two years:

1.demand has increased and supply has decreased.

2.both supply and demand have increased.

3.both supply and demand have decreased.

4.supply has increased and demand has decreased.