Macroeconomics chapter four

Question 1

equilibrium

Answer 1

The price at which the quantity demanded is equal to the
quantity supplied.

Question 2

where does equilibrium occur

Answer 2

at the intersection of the demand and supply curves

Question 3

Equilibrium price and quantity are the only ones are what in a free market?

Answer 3

stable

Question 4

If the point is not at equilibrium what will happen

Answer 4

economic forces push prices and quantiles back to equilibrium

Question 5

surplus

Answer 5

a situation in which quantity supplied is greater than quantity demanded

Question 6

When there is a surplus in a competitive market:
a. Price will increase.
b. Price will decrease.
c. Price will remain the same.

Answer 6

b. Excess supply will cause suppliers to
decrease price.

Question 7

shortage

Answer 7

A situation in which quantity demanded is greater than
quantity supplied.

Question 8

When there is a shortage in a competitive market:
a. Price will increase.
b. Price will decrease.
c. Price will remain the same.

Answer 8

a. Excess demand will cause price to increase.

Question 9

In what ways does a free market maximize the gains from trade

Answer 9

1. Available goods are bought by buyers with the highest willingness to pay.
2. Goods are sold by the sellers with the lowest costs.
3. Between buyers and sellers, there are no unexploited gains from trade or any wasteful trades

Question 10

if the quantity traded is less than equilibrium quantity:
a. Resources will be wasted.
b. Suppliers will only supply goods at equilibrium price.
c. Some gains from trade will be lost.

Answer 10

c. Some gains from trade will be lost.

Question 11

in 1956 who tested the supply and demand law in a lab

Answer 11

Vernon Smith

Question 12

A decrease in supply will:
a. Increase both price and quantity.
b. Decrease price and increase quantity.
c. Increase price and decrease quantity

Answer 12

c. Lower supply causes a shortage, increasing
price and causing consumers to buy less.

Question 13

A decrease in demand will:
a. Decrease both price and quantity.
b. Decrease price and increase quantity.
c. Increase price and decrease quantity.

Answer 13

A. Lower demand causes a surplus, lowering
prices and causing suppliers to supply less.

Question 14

A change in the quantity demanded is a movement along what

Answer 14

a fixed demand curve

Question 15

a change in demand is a shift of what

Answer 15

the entire demand curve

Question 17

what is a change in supply

Answer 17

a shift of the entire supply curve

Question 18

a change in the quantity supplies is movement along what

Answer 18

a fixed supply curve