Identify a limitation of the aggregate expenditure model. Explain what is missing from the model that causes that limitation.
What will be an ideal response?
Answers will vary. Students should identify and explain a limitation such as the failure to explain stagflation. For that example, the aggregate expenditure model cannot reflect the combined forces of unemployment and inflation because it does not incorporate possible shifts in the aggregate supply curve.
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In order to ________ the long-run real interest rate, the Fed needs to ________
A) raise; raise the long-run inflation expectations B) raise; lower the long-run nominal interest rate C) lower; raise the long-run nominal interest rate D) lower; raise the long-run inflation expectations
Between 1982 and 2002, U.S. GDP per capita grew at an average rate of 5.5 percent per year
a. True b. False Indicate whether the statement is true or false
if the per capita income of a country is growing at 3.5 percent per year, approximately how long will it take for that income to double?
What will be an ideal response?
Which of the following would be most appropriate if the Federal Reserve wanted to increase the money supply in order to stimulate the economy?
A. Buy U.S. government securities. B. Force the Treasury to reduce the national debt. C. Raise the discount rate. D. Increase the reserve requirements.