Refer to the diagram. Assume that nominal wages initially are set on the basis of the price level P 2 and that the economy initially is operating at its full-employment level of output Q f . In the long run, an increase in the price level from P 2 to P 3 will:
A. increase real output from Q f to Q 2 .
B. change aggregate supply from AS 2 to AS 1 .
C. decrease real output from Q 2 to Q 1 .
D. move the economy from b to d.
D. move the economy from b to d.
You might also like to view...
Refer to Figure 2-8. What is the opportunity cost of one dozen roses?
A) 0.4 dozen orchids B) 2.5 dozen orchids C) 7.25 dozen orchids D) 16 dozen orchids
How can banks increase the amount of loanable funds available for private lending?
(a) By selling government securities to securities dealers and the Federal Reserve System (b) By buying government securities from securities dealers and the Federal Reserve System (c) By buying stocks, property and other assets to hold on behalf of the banks (d) By holding 100 percent of customers' deposits in bank vaults
Suppose a person's utility for leisure (L) and consumption (Y) can be expressed as U = Y + L0.5. Show what happens to the person's labor supply curve when the income tax is cut from 70 % to 30 %. Denote hours worked as H and wage per hour as w
What will be an ideal response?
The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.
What will be an ideal response?