Refer to Figure 16-5. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and no fiscal or monetary policy is pursued, then at point B
A) the unemployment rate is very low.
B) the economy is above full employment.
C) firms are operating below capacity.
D) income and profits are rising.
E) there is pressure on wages and prices to rise.
C
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Which of the following statements is TRUE?
A) The infant-industry argument is valid only if the benefits of learning-by-doing in the infant industry spill over to other parts of the economy. B) A subsidy to an infant industry is a more efficient way to protect it from foreign competition than a tariff on the competing foreign goods. C) Both statements are true. D) Neither of the statements is true.
What are the pros and cons of using cold turkey disinflation compared to a policy of gradualism?
What will be an ideal response?
Which of the following goods is an intermediate good?
A) lettuce that a restaurant buys to put on sandwiches B) tires that a car company buys to put on the cars it produces C) a television set that Chi-Mai buys to put in her college dorm room D) a and b E) b and c
Assume a central bank follows a rule that requires it to take steps to keep the price level constant. If the price level fell because of a decrease in aggregate demand and an increase in aggregate supply that kept output unchanged, then
a. the central bank would have to decrease the money supply which would decrease output. b. the central bank would have to decrease the money supply which would increase output. c. the central bank would have to increase the money supply which would decrease output. d. the central bank would have to increase the money supply which would increase output.