Short-run equilibrium output is the level of output at which real GDP
A. equals real GDP per capita.
B. equals potential output.
C. maximizes firm profits.
D. equals aggregate expenditure.
Answer: D
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Comment on the following statement. "Once general equilibrium is achieved this will result in a long-run equilibrium as well."
What will be an ideal response?
Suppose the federal government wants to encourage businesses to increase investment spending. Which policy may be the most effective?
A. An increase in corporate income taxes B. An increase in real interest rates C. An increase in warnings of a coming recession D. An increase in tax deductions for investment spending
Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the long run would be:
A. P1 and Y2. B. P2 and Y2. C. P3 and Y1. D. P2 and Y3.
If producers have an expectation of higher future prices, the supply of the good that is currently available:
A. will be all that is produced. B. will increase. C. will decrease. D. will not change.