Consider the Market for Wheat That Is Initially in Equilibrium

question 106

Multiple Choice

Consider the market for wheat that is initially in equilibrium.In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate?​

• A) If supply and demand both decline
• B)If supply and demand both rise
• C)If supply declines and demand rises
• D)If supply rises and demand declines
• E)If supply remains constant and demand rises

---

Definitions:

Expansionary Gap

A situation where the total demand in an economy exceeds its potential output, leading to inflationary pressures.

Recessionary Gap

A situation in which the real GDP is lower than the potential GDP, leading to unemployment and underutilized resources.

Supply Shock

A supply shock is an unexpected event that suddenly changes the supply of a product or commodity, leading to sudden changes in its price.

Recessionary Gap

A situation where the real Gross Domestic Product (GDP) is lower than the potential GDP, indicating underperformance in the economy.