Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level?
A. a decrease in aggregate supply
B. an increase in aggregate supply
C. a decrease in aggregate demand
D. an increase in aggregate demand
Answer: C
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Producer surplus for the whole market can be thought of as
A) total profit. B) variable operating profit plus factor rents. C) total profit minus factor rents earned by lower cost firms. D) total profit plus factor rents earned by lower cost firms.
Planned expenditures ________
A) are directly affected by government purchases B) increase when there is a reduction in taxes C) decrease when disposable income decreases D) all of the above E) none of the above
The process by which financial institutions accept savings from businesses, households and governments and lend the savings to other businesses, households and governments is
A) asymmetric information. B) adverse selection. C) moral hazard. D) financial intermediation.
Define horizontal equity and briefly describe some features of the U.S. federal income tax system that may interfere with achieving it