Suppose aggregate demand is increasing over time. Would the modern Keynesian model assume that the price level would always be constant? Explain
What will be an ideal response?
No. Eventually full employment would be reached and firms would be producing at full capacity. The price level would adjust as prices would increase. That is, the short-run aggregate supply curve cannot be horizontal at all possible values of real Gross Domestic Product (GDP).
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A rising dollar makes U.S. goods
A) more expensive abroad and increases the volume of U.S. exports. B) less expensive abroad and increases the volume of U.S. exports. C) less expensive abroad and decreases the volume of U.S. exports. D) more expensive abroad and decreases the volume of U.S. exports.
Which of the following cause(s) economic growth?
a. c and d. b. d and e. c. The production of more scarce goods d. A technological improvement e. The production of more capital goods
Which of the following statements is not correct?
a. Reducing taxes on interest income might encourage people to save more. b. Reducing taxes on interest income might reduce saving. c. A price increase will create income and substitution effects that will both always work to reduce consumption of the good. d. Utility is maximized when the marginal rate of substitution between any two goods equals the relative prices of the two goods.
Which of the following would be a macroeconomic question?
A. How have the retirement benefits in the auto industry changed over time? B. How has inflation increased over time? C. How has the price of gold increased over time? D. How has the number of commercial airline flights decreased over time?