Refer to Exhibit 4. If a tax is placed on the product in this market consumer surplus is the area ?

A. D
B. A
C. A + b + e
D. A + b +c + d

Refer to Exhibit 4. If a tax is placed on the product in this market tax revenue paid by the buyers is the area ?

A. B + c + e + f
B. B
C. B + c
D. A

Refer to Exhibit 4. If there is no tax placed on the product in this market total surplus is the area ?

A. B + c + e + f
B. E + f
C. A + b + c + d
D. A + b + c + d + e + f

Suppose the economy is initially in long-run equilibrium Then suppose there is an increase in military spending due to rising international tensions According to the model of aggregate demand and aggregate supply what happens to prices and output in the short run ?

A. Price fall; output rises
B. Price fall; output falls
C. Price rise; output fall
D. Price rise; output rise

Suppose the economy is initially is long run equilibrium Then suppose there is a drought that destroys much of the wheat crop According to the model of aggregate demand and aggregate supply, what happens of prices and output in the short run ?

A. Price rise; output falls
B. Price fall; output rises
C. Price rise; output rises
D. Price fall; output falls

Stagflation occurs when the economy experiences ?

A. Rising prices and rising output
B. Rising prices and falling output
C. Falling prices and falling output
D. Falling prices and rising output

Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers wished to move output to its long run natural rate they should attempt to ?

A. Shift aggregate demand to the left
B. Shift short run aggregate supply to the left
C. Shift aggregate demand to the right
D. Shift short-run aggregate supply to the right

According to the model of aggregate supply and aggregate demand in the long run an increase in the money supply should cause ?

A. Prices to rise and output to rise
B. Price to fall and output to remain unchanged
C. Prices to fall and output to fall
D. Prices to rise and output to remain unchanged

According to the wealth effect aggregate demand slopes downward (negatively) because ?

A. Lower prices increase the value of money holding and consumers spending increase
B. Lower prices decrease the value of money holding and consumers spending decrease
C. Lower prices reduce money holding increase lending, interest rates fall and investment spending increase
D. Lower prices increase money holding decrease lending, interest rates rise and investment spending falls

Suppose the price level falls but because of fixed nominal wage contracts the real wage rises and firms cut back on production This is a demonstration of the ?

A. Sticky-wage theory of the short-run aggregate supply curve
B. Classical dichotomy theory of the short-run aggregate supply curve
C. Misperceptions theory of the short-run aggregate supply curve
D. Sticky-price theory of the short run aggregate supply curve