Holding the level of prices fixed implies that a given decrease in aggregate demand
A. has the same effect on real GDP as when prices are more flexible.
B. will have a larger effect on real GDP than would be the case if prices were more flexible.
C. has a smaller effect on nominal GDP than when prices are more flexible.
D. will have a smaller effect on real GDP than would be the case if prices were more flexible.
Answer: B
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A higher inflation rate changes the user cost of capital, which ________ the profit-maximizing level of MPK for firms, leading firms to a ________ capital-output ratio, thus ________ net investment
A) raises, higher, raising B) raises, lower, lowering C) lowers, higher, raising D) lowers, higher, lowering E) lowers, lower, raising
Proponents of passive policy making believe that
A) the existence of time lags makes active policy ineffective or even procyclical. B) time lags do not exist so the economy will adjust too rapidly with active policy. C) government should not follow any particular policy. D) fiscal policy is always better than monetary policy in stabilizing the economy.
The source of the water and diamond paradox results from a confusion about
a. luxuries and necessities b. who uses what goods c. the extraordinary role played by consumer surplus in the case of diamonds d. which good lies on the indifference curve e. the role that total and marginal utilities play in determining value
Which point shows where the United States economy was operating during the low point of the Great Depression?
A. Point A
B. Point B
C. Point C
D. Point D