Suppose a Country Has No Trade with Other Countries and People

question 99

Multiple Choice

Suppose a country has no trade with other countries and people can borrow as much money as they want at the current interest rate.An increase in the price level will generate

• A)a decrease in quantity demanded because of the real-balance effect.
• B)a decrease in quantity demanded because of the open-economy effect and the indirect effect.
• C)a decrease in quantity demanded because the real-balance effect will be stronger than the indirect effect and the open-economy effect.
• D)a decrease in quantity demanded because the indirect effect will be stronger than the real-balance effect.

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Definitions:

Pure Monopolist

A single seller in a market that has complete control over the supply of a product and where no close substitutes exist.

Reselling

The act of selling again or selling something that has already been sold or owned, often seen in markets for goods like tickets, merchandise, and real estate.

Average Total Costs

The average cost for each unit produced, found by dividing the full cost of production by the quantity of units produced.

Elastic Demand

A situation where the demand for a product or service significantly changes in response to price changes.