In the long run, a leftward shift of the aggregate demand curve will lead to a(n):
a. increase in equilibrium output but will not change the price level in an economy.
b. increase in the price level as well as the equilibrium output in an economy.
c. decrease in the price level but will leave the equilibrium output unchanged in an economy.
d. increase in the price level but will leave the equilibrium output unchanged in an economy.
e. decrease in the price level as well as the equilibrium output in an economy.
c
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Adverse selection:
A. is about actions and occurs after the parties have voluntarily entered into an agreement. B. is always present when moral hazard arises. C. relates to unobserved characteristics of people or goods and occurs before the parties have entered into an agreement. D. All of these statements are true.
The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that:
a. gasoline is an economic good but water is not. b. the marginal utility of gasoline is greater than the marginal utility of a gallon of water. c. the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. d. the total utility of gasoline exceeds the total utility of water.
Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?
Economics involves marginal analysis because:
A. most decisions involve changes from the present situation. B. marginal benefits always exceed marginal costs. C. marginal costs always exceed marginal benefits. D. much economic behavior is irrational.