5 If the government fixed a minimum price of bread above the equilibrium price and there was no further government intervention in the market for bread, which of the following would result? A There would be a surplus on the market and bread producers’ income would fall. B There would be an equilibrium in the market but the change in bread producers’ income would be uncertain. C There would be a shortage on the market and bread producers’ income would rise. D There would be a surplus on the market but the change in bread producers’ income would be uncertain. The given answer is D may I know why the income is uncertain ? Which of the following would NOT explain why, when the price of a good rises, the quantity supplied will also rise? A Firms expect future prices to rise. B At higher levels of output firms will incur higher costs. C The higher the price the more profitable it becomes to produce. D The price of a good remains high over a given time period. May I know why A is the answer?
If firms in a perfectly competitive industry are making a loss in the short run then in the long run firms will: A increase their price and increase output. B lower their price and increase output. C increase their price and lower output. D lower their price and lower output. for this right why shouldnt the firm lower the price and increase output ?
The overall money multiplier effect might be smaller than the full bank deposits multiplier because: A governments are pursuing an expansionary monetary policy. B high rates of interest are discouraging borrowing. C banks are not holding excess cash reserves. D all proceeds of loans are re-deposited with banks May I know whats the meaning of this question here and why is it A? 24 Which of the following would cause the demand for money curve to shift inwards to the left? A An increase in the frequency of payments to individuals. B An increase in real Gross Domestic Product. C A decrease in the rate of interest. D An increase in prices. may i know why increase in price would not shift money demand curve inwards ? 23 The use of debit cards and cash withdrawal machines will have the following effect on a bank: A Lower the bank’s liquidity ratio and increase the bank deposits multiplier. B Increase the bank’s liquidity ratio and lower the bank deposits multiplier. C Lower the bank’s liquidity ratio and leave the bank deposits multiplier unchanged. D The effect on the bank’s liquidity ratio and the bank deposits multiplier will be uncertain. for this question is there any formula or graph for me to determine the liquidity ratio and bank deposit multiplier ?
We don't know the impact of imposing the price floor eg if the % change in price is greater than the % reduction in quantity sold then producers' income will rise. But if the % change in price is less than the % reduction in quantity sold then incomes will fall
If firms expect prices to rise in future, they are likely to reduce supply now in order to be able to supply more later, at the higher price. So expectations of future price rises don't explain the behaviour seen and so A may be correct. Checking the other options confirms this.
Recall that firms in perfect comp are price takers, they can't choose to increase or decrease price. Eg if price increases it is because firms leave the industry which reduces supply and increases the market price. Firms then change the level of production in order to maximise their profits (at the new and higher price). So if firms are making a loss in the short run, we would expect some to leave the industry in the long run and the market price to rise until the remaining firms are making normal profits
The money multiplier and bank deposits multiplier are described in detail on pages 574-578 of the textbook
An increase in prices will increase the demand for money under the transactions motive (people need more money to buy the same things)
