Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward
B. Short-run aggregate supply shifting downward
C. Aggregate demand shifting rightward
D. Aggregate demand shifting leftward
Answer: B
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
Long-run full-employment equilibrium assumes: a. a downward-sloping production function. b. a downward-sloping long-run supply curve (LRAS)
c. the CPI index price level equals the equilibrium wage rate. d. the CPI equals aggregate demand (AD) equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS).
A customs union is an organization of nations whose members:
a. have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers. b. have no trade barriers among themselves but impose common trade barriers on nonmembers. c. have no trade barriers among themselves but each member country chooses its own trade policies with nonmember countries. d. retaliate each other by raising reciprocal tariffs and calling for fair trade. e. neither have trade barriers among themselves nor impose any restriction on the nonmember countries.
Daniel owns a coffee kiosk. All of his employees work 8 hours per day. In 2011, he employed 6 people who produced a total of 912 cups of coffee each day. In 2012, he hired a seventh employee and production increased to 1008 cups of coffee each day. In Daniel's kiosk, productivity
a. increased by about 10.5 percent b. increased by 9.5 percent c. decreased by about 5.6 percent d. decreased by about 5.3 percent