Refer to the following graphs. Given an increase in aggregate demand from AD1 to AD2, which of the following statements is true?
a. Classical economists argue the Aggregate Supply (AS) curve would be vertical like that shown in graph (a).
b. Keynesian economists argue the Aggregate Supply (AS) curve would be horizontal in the short run like that shown in graph (b).
c. Keynesian economists argue the Aggregate Supply (AS) curve would be vertical in the long run like that shown in graph (a).
d. All of the above.
d. All of the above.
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Is it possible to express an economic model in words without diagrams?
A. No, models can only be stated in diagrams. B. No, the very definition of model requires mathematical form. C. Yes, some of the simplest models are verbal statements. D. Yes, although the best models always use diagrams. E. Uncertain, economic theory has not answered this question yet.
If smartwatches are considered substitutes for smartphones, then the decline in the price of smartwatches would, all else equal
A) increase the demand for smartphones. B) decrease the quantity of smartphones demanded. C) decrease the demand for smartphones. D) increase the quantity of smartphones demanded.
Open market purchases ________ reserves and the monetary base thereby ________ the money supply
A) raise; lowering B) raise; raising C) lower; lowering D) lower; raising
Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of the tax
a. will fall primarily on producers. b. will fall primarily on consumers. c. will be split equally between consumers and producers. d. cannot be determined because the burden of a tax is not influenced by the elasticities of supply and demand.