Practice Questions
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If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand for this product?
The price elasticity of demand measures how much the quantity demanded changes when the price changes. Other options are incorrect because This option...
Which of the following scenarios best illustrates the relationship between demand and supply curves in a market experiencing an increase in consumer income?
When people have more money, they want to buy more things. Other options are incorrect because This option suggests that supply decreases when income ...
How can an increase in the inflation rate be visually represented on a trade balance graph, and what impact does it generally have on exports and imports?
When inflation rises, prices go up. Other options are incorrect because This option suggests that higher prices would make our goods cheaper for other...
How does an expansionary monetary policy shift the market equilibrium in a supply and demand graph?
Expansionary monetary policy means more money is available. Other options are incorrect because This answer suggests that supply decreases, which is n...
How would an increase in the inflation rate impact the demand and supply curves for a commonly traded commodity, like oil, as well as the overall trade balance depicted in a graph?
When inflation rises, people may have less money to spend, so they buy less oil. Other options are incorrect because This option suggests that demand ...
Which of the following graphs best represents the relationship between supply and demand in a competitive market?
In a competitive market, demand goes down when prices go up, so it slopes down. Other options are incorrect because This option shows demand going up ...
What happens to the equilibrium price when demand increases while supply remains constant?
When more people want a product, they are willing to pay more for it. Other options are incorrect because Some might think that more demand means lowe...
In a standard supply and demand graph, what happens to the market equilibrium price when demand increases while supply remains constant?
When more people want to buy something, the price usually goes up. Other options are incorrect because Some might think that more demand means lower p...
A neighboring country experiences a significant increase in income levels, leading to higher demand for exports. Which of the following correctly classifies the expected shift in your country's aggregate demand and explains the reasoning behind this classification?
When the neighboring country earns more money, they want to buy more goods from your country. Other options are incorrect because This option suggests...
When graphing the economic impacts of one country's recovery on another, a shift in the aggregate supply curve is often represented by a change in __________.
When production costs change, it affects how much goods can be made. Other options are incorrect because Some might think that consumer demand affects...
If a country's income levels increase significantly, how should this be represented on the aggregate demand and supply graph for its trading partner?
When a country's income goes up, its people can buy more goods. Other options are incorrect because This option suggests that the supply curve should ...
If a country's economy recovers, leading to an increase in its income levels, what is the most likely impact on the aggregate demand of its trading partners?
When a country's economy gets better, people have more money to spend. Other options are incorrect because Some might think that people save more mone...
Aggregate demand shifts are to economic recovery as supply shifts are to what?
When supply decreases, prices tend to rise. Other options are incorrect because Some might think that supply shifts always lead to a recession; People...
A country experiences a significant increase in the income levels of its trading partners. How would this likely impact the aggregate demand and supply model for this country? Choose the most accurate representation of the expected economic change.
When trading partners earn more money, they buy more goods. Other options are incorrect because This option suggests that production costs rise, which...
Arrange the following steps in the correct order to effectively graph the economic impact of a trading partner's recovery on your country's economy: A) Identify the direction of the shift in aggregate demand or supply B) Label the axes and curves on the graph C) Plot the initial equilibrium point D) Explain the implications of the graph on economic policy
First, you need to plot the initial equilibrium point. Other options are incorrect because This option starts by labeling the graph before plotting th...
If a country's income levels rise significantly, how would this typically affect the aggregate demand in a trading partner's economy?
When a country earns more money, its people can buy more goods. Other options are incorrect because This answer suggests that the trading partner will...
Which of the following actions would correctly represent the economic impact of a trading partner's recovery on your country's economy in a demand and supply graph? Select all that apply.
Other options are incorrect because This option suggests that demand for exports increases; This option implies that production costs rise....
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