In the Keynesian zone of the short-run aggregate supply, what happens when aggregate demand increases?
a. There is increasing unemployment pressure.
b. There is inflationary pressure.
c There is no inflationary pressure.
d. There is a lack of growth.
c There is no inflationary pressure.
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Refer to the above figure. Suppose the economy is in equilibrium at point A
If the Fed tries to stimulate the economy by undertaking an expansionary monetary policy action and this is not expected by the people in the economy, we would expect to see A) aggregate supply shifts up as people anticipate the effects of the expansionary monetary system. In the short run, real GDP falls to $13 trillion and the price level rises to 120. In the long run, real GDP returns to $14 trillion, and the price level increases further, to 150. B) aggregate demand increases but people would anticipate this, causing the short-run aggregate supply curve to shift up at the same time, with the new equilibrium of $14 trillion of real GDP and a price level of 100. C) aggregate demand increases, real GDP increases, and the price level increases in the short run. In the long run, people realize the real situation, causing the short-run aggregate supply curve to shift u
What is the difference between "diminishing marginal returns" and "diseconomies of scale"?
A) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. B) Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. D) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.
The government announces a tax increase on workers' wages to take effect in the future. What happens to current employment and the real wage rate?
A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.
The aggregate supply curve of an economy: a. is a downward-sloping straight line
b. is an upward-sloping curve. c. is a vertical line parallel to the price axis. d. is a horizontal line parallel to the output axis. e. is a ray from the origin.