If actual real GDP is greater than the equilibrium level of real GDP (i.e., the aggregate expenditures function is below the 45-degree line), what happens to restore equilibrium to the economy?
At the current level of real GDP, aggregate spending (C + I + G + NX) is less than aggregate supply. The amount of goods and services produced is greater than the amount people intend to buy. Inventories rise above the levels firms desire to hold. These unintended inventory increases are a signal to firms to reduce production. Production will continue to fall until the amount firms produce just equals aggregate expenditures.
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A market structure in which two firms control the market is a
a. monopoly. b. monopolistic competition. c. perfect competition. d. duopoly.
Who does NOT earn economic rent in a competitive factor market?
A) No one B) Everyone C) The last factor of production hired D) The inframarginal workers E) Only owners of physical properties earn economic rents
The rent earned on marginal land is
a. zero. b. the average of all qualities of land. c. above the average of all qualities of land. d. below the average of all qualities of land.
What are the three time horizons used to categorize aggregate supply? What is the difference between the immediate short-run and the short-run aggregate supply?
What will be an ideal response?