The self-correcting mechanism to return the economy to potential output from output gaps is the change in:
A. short-run aggregate supply.
B. aggregate demand.
C. the real interest rate by the central bank.
D. potential output.
Answer: A
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The above figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm A,
A) setting a low price is the dominant strategy. B) setting a high price is the dominant strategy. C) setting a high price when firm B sets a high price, and setting a low price when firm B sets a low price is the dominant strategy. D) setting a high price when firm B sets a low price, and setting a low price when firm B sets a high price is the dominant strategy.
All of the following are true regarding cartels except which one?
A) They are stable. B) They create a deadweight loss. C) They are illegal. D) They set the price higher than the competitive price.
A smart phone would be considered:
A. a private good. B. a common resource. C. a public good. D. an artificially scarce good.
Refer to the above figure. An increase in aggregate demand beyond real Gross Domestic Product (GDP) level Y1 would result in
A. a lower price level and an increases in real GDP. B. higher real GDP but not a higher price level. C. a lower price level but no change in real GDP. D. a higher price level but no change in real GDP.