Joe's increase in wages has been identical to the increase in the price level. Joe thinks that he is better off and has increased his expenditures. Joe's behavior is consistent with
A. a vertical aggregate supply curve.
B. Say's law.
C. the classical model.
D. money illusion.
Answer: D
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An income tax will have zero welfare cost when an individuals labor supply curve is perfectly inelastic _____
a. always b. never c. only if the income effect is zero d. only if the substitution effect is zero
An increase in the expected future price of inputs will cause:
A. the short-run aggregate supply curve to shift to the left. B. the aggregate demand curve to shift to the right. C. a movement rightward along the short-run aggregate supply curve. D. the long-run aggregate supply curve to shift to the left.
Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by
a. continuing technological progress alone. b. continuing increases in the money supply alone. c. continued technological progress and continuing increases in the money supply. d. None of the above can explain continuing real GDP growth and inflation.
In the long run, the increase in money supply changes ______.
a. inflation b. the interest rate c. the price level d. RGDP