Figure 34-2

question 136

Multiple Choice

Figure 34-2
(a) The Money Market
(b) The Aggregate Demand Curve
-Refer to Figure 34-2. A decrease in Y from Y₁ to Y₂ is explained as follows:

• A)The Federal Reserve increases the money supply, causing the money-demand curve to shift from MD₁ to MD₂; this shift of MD causes r to increase from r₁ to r₂; and this increase in r causes Y to decrease from Y₁ to Y₂.
• B)An increase in P from P₁ to P₂ causes the money-demand curve to shift from MD₁ to MD₂; this shift of MD causes r to increase from r₁ to r₂; and this increase in r causes Y to decrease from Y₁ to Y₂.
• C)A decrease in P from P₂ to P₁ causes the money-demand curve to shift from MD₁ to MD₂; this shift of MD causes r to increase from r₁ to r₂; and this increase in r causes Y to decrease from Y₁ to Y₂.
• D)An increase in the price level causes the money-demand curve to shift from MD₂ to MD₁; this shift of MD causes r to decrease from r₂ to r₁; and this decrease in r causes Y to decrease from Y₁ to Y₂.

Comprehend the role of cartels in oligopolistic industries and the effects on output and price.

Identify the applications and implications of game theory in the analysis of oligopolistic market behavior.

Understand the concept of the kinked-demand curve in explaining pricing behavior and price rigidity in oligopolistic markets.

Recognize the conditions under which collusion might occur in oligopolistic industries and its impact on market outcomes.