Use the dynamic model of aggregate demand and supply to illustrate a situation where the economy is growing but experiencing inflation in the long run
What will be an ideal response?
If the aggregate demand curve shifts to the right faster than the short-run aggregate supply curve, this can cause inflation. Beginning at point A, AD1 shifts to the right, say because of an increase in government spending due to the war in Iraq. LRAS1 shifts to the right because of the long-run growth in the economy. However, it shifts by less than the aggregate demand curve. The graph also shows the short-run aggregate supply curve shifting to the right by a horizontal distance that is a relatively smaller amount than the aggregate demand curve shift. As a result, the economy ends up at a final equilibrium at point B. The price level has increased.
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A rise in the price level ________ the buying power of money and ________ the quantity of real GDP demanded
A) does not affect; does not change B) raises; decreases C) does not affect; increases D) lowers; decreases E) lowers; increases
Refer to Scenario 5.2. Which of the following is true?
A) Randy has a higher expected expense than Samantha for the car. B) Randy has a lower expected expense than Samantha for the car. C) Randy and Samantha have the same expected expense for the car, and it is somewhat less than $20,000. D) Randy and Samantha have the same expected expense for the car: $20,000. E) It is not possible to calculate the expected expense for the car until the true probabilities are known.
A monopsony has an upward sloping supply curve because
A) diminishing marginal product to scale does not exist in a monopsony. B) each additional unit of labor costs less. C) when more units of labor are hired, all laborers must receive the higher wage. D) when more units of labor are hired, only the new workers receive the higher wage.
Which of the following statement is correct?
A. When Marginal Product is greater than Average Product, Average Product is equal to Total Product. B. When Marginal Product is greater than Average Product, Average Product is decreasing. C. When Marginal Product is greater than Average Product, Total Product is increasing at a decreasing rate. D. When Marginal Product is greater than Average Product, Average Product is increasing.