Aggregate demand determines output in the short run if prices are flexible
Indicate whether the statement is true or false
FALSE
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If a perfectly competitive firm's average total cost is less than the price, then the firm
A) incurs an economic loss. B) makes an economic profit. C) makes zero economic profit. D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit in 2004
A) the supply curve shifted to the left resulting in an increase in the equilibrium price. B) the demand curve shifted to the right resulting in an increase in the equilibrium price. C) the demand curve shifted to the left resulting in a decrease in the equilibrium price. D) the supply curve shifted to the right resulting in an increase in the equilibrium price.
The reserve requirement is:
A. the regulation that sets the minimum fraction of deposits banks must hold in reserve. B. the dollar amount of cash banks must keep on hand and not loan out. C. currently set at $2 million for most banks. D. a loose guideline for how much banks must hold in reserves.
In which of these industries would you expect the least elastic response from suppliers?
a. fast food b. soft drink c. road building d. aircraft e. Picasso paintings