Question

QUESTION 6 1 poin An adverse supply shock causes output to increase; increase and prices to increase; decrease decrease increase O decrease; decrease QUESTION 7 1 poir The demand curve for an individual good almost always slopes downward because O demand varies inversely with prices of other goods. the quantity demanded varies inversely with time. the quantity demanded varies inversely with price. demand varies inversely with the income of consumers. QUESTION 8 1 poir The basic principle of the production possibilities frontier is that, if there are no unused resources in an economy, the production of one good can be increased only if the production of the other good is decreased. the increase in the production of one good will increase the profits earned by all firms. the marginal cost of production equals the total cost of production. the economy will produce its potential output levels and there will be no unemployment.

Answer 1

Ans) 1) An adverse supply shock causes aggregate supply curve to shift left. This will decrease output and increase price.

Option c.

2) Demand curve slopes downward because quantity demanded and price are inversely related i.e as price increases, quantity demanded decreases and vice versa.

Option c.

3) PPC shows possible combination of goods that can be produced in an economy given limited resources and technology. If all the resources are employed then to increase production of one good, production of other good must be reduced.

Option a.