An economy in long-run equilibrium experiences an increase in aggregate demand. According to the classical model,
A) the price level will increase, but real GDP will not change.
B) the price level and real GDP will increase at the same time.
C) the price level will increase, but real GDP will decrease.
D) the price level will rise first, then real GDP will increase.
A
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Tourists in foreign countries are often charged more for hand-made items at tourist shops compared to the local customers. Why?
A) The tourists are typically less informed than the local customers. B) The tourists typically have fewer available alternatives compared to the local customers. C) The shop owners can usually identify tourists. D) For all of the above reasons.
According to Keynes, if the economy is in a deep recession, an increase in aggregate demand will
A. increase real GDP without putting significant upward pressure on the price level. B. decrease real GDP. C. increase the price level with no effect on real GDP. D. increase both real GDP and the price level.
If a monopsonist offers a wage of $6, he finds that 1,200 people are willing to work for him. This means that the:
a. marginal factor cost is $6. b. marginal factor cost is $200. c. total wage cost is $1,200. d. total wage cost is $7,200. e. $6 wage is too high.
Cost-push inflation is inflation caused by
a. a decrease in aggregate demand b. a decrease in aggregate demand and an increase in aggregate supply c. a shortage of all goods d. an increase in aggregate supply e. a decrease in aggregate supply