Question

1. Along a given demand curve, a decrease in supply will typically

   a		decrease price, but the change in quantity could be in either direction
   b		increase price and decrease the quantity
   c		decrease price but leave quantity unchanged
   d		decrease both quantity and price
   e		increase both quantity and price

2 Stagflation refers to

a		a combination of rising unemployment and rising trade deficits
b		a combination of high unemployment and rising prices
c		high and rapidly increasing inflation
d		extremely high unemployment
e		a combination of rising trade deficits and rising federal government budget deficits

3. Which of the following would be included in this year's GDP?

	a	one hundred shares of IBM stock that Tony Hanks bought this May
	b	the used car Tracey sold to Justin
	c	George Garcia's purchase of a fishing rod and reel at a garage sale
	d	the $20 Sharon Johnson gave Dennis O'Brien as a reward for finding her lost wedding ring
	e	that bucket of Kentucky Fried Chicken you bought this July

Answer 1

Q1
Answer
Option
b increase the price and decrease the quantity
===
A decrease in supply shifts the supply curve to the left which increases price and decreases quantity at the new equilibrium as a demand curve is downward sloping and the upward movement along the demand curve at a higher price and lower quantity.
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Q2
Answer
Option
b. a combination of high unemployment and rising prices
===
Stagflation refers to a combination of high unemployment and rising prices
It is created by a negative supply shock in an economy where prices increases and output decreases.
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Q3
Answer
Option
e. that bucket of Kentucky Fried Chicken you bought this July.
===
A GDP is the sum of all the final goods and services produced in an economy in a given year. Old shares, used goods are not added in the current year GDP as it is added in the GDP at the time it was new and final good so the final consumption of bucket of Kentucky Fried Chicken is added in the GDP and not other options provided.