The assumption that prices and wages are flexible implies that the:
A. short-run aggregate supply curve is irrelevant.
B. long-run aggregate supply curve is irrelevant.
C. long-run aggregate supply curve could not shift.
D. short-run aggregate supply curve shifts slowly in response to deviations of current output from potential output.
Answer: A
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Opportunism may occur when
A) both parties have limited information. B) both parties have full information. C) one party has information the other does not. D) All of the above.
When a freely functioning market is in disequilibrium:
a. the government must set a price ceiling. b. the government must set a price floor. c. the price and quantities demanded and/or supplied change until equilibrium is established. d. it will continue to remain in disequilibrium. e. it will reach equilibrium at a very high/low price.
When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
The following graph is the production possibilities curve of a nation:
Refer to the above graph. Which of the following combinations would be unattainable?
A. 8 drill presses and 1 bread
B. 7 drill presses and 2 bread
C. 10 drill presses and 4 bread
D. 2 drill presses and 3 bread