Which of the following are positive feedback mechanisms? Select all correct answers.O In a boom, asset prices rise, borrowers have more collateral, banks become more willing to lend to them, andspending increases further.O The boycotting of an oil-producing country causes a shortage of oil and a rise in oil prices. The quantitydemanded falls as consumers switch to other fuels, causing the price to stabilise.O A fall in the price level (deflation) causes consumers to expect further falls. This causes them to postponespending and the reduction in demand causes prices to fall further.O Serious road congestion causes travellers to switch to trains and subway, limiting the further increase incongestion.

Answer Explanation The positive feedback: The overall level of costs in the associate economy and a…

Answered: JA fall in the price level (deflation)…

JA fall in the price level (deflation) causes consumers to expect further falls. This spending and the reduction in demand causes prices to fall further.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Which of the following are positive feedback mechanisms? Select all correct answers.
O In a boom, asset prices rise, borrowers have more collateral, banks become more willing to lend to them, and
spending increases further.
O The boycotting of an oil-producing country causes a shortage of oil and a rise in oil prices. The quantity
demanded falls as consumers switch to other fuels, causing the price to stabilise.
O A fall in the price level (deflation) causes consumers to expect further falls. This causes them to postpone
spending and the reduction in demand causes prices to fall further.
O Serious road congestion causes travellers to switch to trains and subway, limiting the further increase in
congestion.

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