According to the AS-AD model,
A) the equilibrium is where the AS curve crosses the AD curve, but the amount of real GDP at this point is not always equal to potential GDP.
B) the aggregate quantity supplied is typically greater than the aggregate quantity demanded, thereby leading to unemployment.
C) the aggregate quantity demanded is typically greater than the aggregate quantity supplied, thereby leading to inflation.
D) changes in the amount of potential GDP is the only factor that shifts both the aggregate supply curve and the aggregate demand curve.
E) the AS curve is always equal to potential GDP.
A
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Demand curves with constant slopes must have different own-price elasticities as one moves along the demand curve.
Answer the following statement true (T) or false (F)
If the cross elasticity of demand is -5 between french fries and orange drink, then french fries
A) and orange drink are complements. B) and orange drink are substitutes. C) are a normal good and orange drink is an inferior good. D) are an inferior good and orange drink is a normal good.
Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will
A) decrease supply of the good. B) increase supply of the good. C) decrease demand for the good. D) increase demand for the good.
Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:
A) shifts to the left. B) shifts to the right. C) remains constant. D) shifts to the right initially and then returns to its original position.