Explain how the different views of the shape of the aggregate supply (AS) curve influence economists' perception of the impact that government actions have on Real GDP in the short run
Some economists believe that the AS curve is upward-sloping in the short run. With an upward-sloping AS, any government policy that stimulates aggregate demand will lead to an increase in Real GDP. These changes can occur from either the demand side of the economy or the supply side of the economy, giving the government more tools to use during difficult economic times. Those economists who believe that AS is vertical, think that government actions designed to change aggregate demand in the economy will lead to no change in Real GDP. They feel that changes in Real GDP come from the supply side of the economy, not the demand side. Therefore, the vertical-AS group thinks that the government has fewer tools capable of raising Real GDP than what the upward-sloping AS economists believe.
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Stock prices increase when expected future dividends ________, interest rates ________, and/or the risk premium ________.
A. decrease; decrease; increases B. increase; increase; increases C. increase; increase; decreases D. increase; decrease; decreases
Figure 3-1
According to Figure 3-1, the opportunity cost of one more bushel of wheat is
A. higher at B than at D. B. lower at B than at D. C. equal at B and D. D. impossible to determine from the information given.
A competitive equilibrium is described by
A) a price only. B) a quantity only. C) the excess supply minus the excess demand. D) a price and a quantity.
The most fundamental concept in economics is that
a. changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive. b. changes in incentives generally do not influence human behavior. c. goods that are provided by government are free for society. d. individuals generally do not consider other alternatives when making a choice.