What is a supply shock, and why might a supply shock lead to stagflation?
What will be an ideal response?
A supply shock is an unexpected event that causes a shift in short-run aggregate supply. An adverse supply shock causes the short-run aggregate supply curve to shift to the left, causing an increase in the price level and a decrease in real GDP. An increase in the price level occurring at the same time as a decrease in real GDP is known as stagflation. A positive supply shock causes the short-run aggregate supply curve to shift to the right, causing a decrease in the price level and an increase in real GDP.
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Using the table above, if the current market value of the dollar is 70 francs
A) investor A expects dollar appreciation, but B and C expect depreciation. B) investor A expects dollar depreciation, but B and C expect appreciation. C) all three investors expect the dollar to appreciate. D) all three investors expect the dollar to depreciate.
Economies of scale exist when:
A. input prices are falling. B. the average cost of production falls as output rises. C. doubling all the inputs leads to less than double the output. D. firms become larger.
In exhibit 9-2, the marginal propensity to consume equals
What will be an ideal response?
One of the basic differences between social and economic regulations is that
A) economic regulations only apply to financial institutions while social regulations apply to a greater variety of institutions.
B) social regulations only apply to non-profit organizations while economic regulations apply only to for-profit organizations.
C) economic regulations cover only particular industries while social regulations apply to all firms in the economy.
D) economic regulations focus on the banking industry while social regulations focus on monopolies.