An aggregate supply curve may be horizontal over some range because within that range
A) a higher price level leads to higher interest rates, which reduce the money supply and consumer spending
B) changes in the aggregate price level do no induce substitution
C) output cannot be increase unless prices and interest rates increase
D) rigid prices prevent employment from fluctuating
E) resources are underemployed and an increase in demand will be satisfied without any pressure on the price level
Answer: E) resources are underemployed and an increase in demand will be satisfied without any pressure on the price level
You might also like to view...
Refer to Table 6-6. Based on the data in the table, between a price of $9.99 and $14.99, the demand for books is
A) elastic. B) inelastic. C) unit elastic. D) perfectly inelastic.
Refer to Table 20-11. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2011 is the base year, then what is the CPI for 2016?
A) 40.08 B) 100 C) 180 D) 208
Successful advertising by a monopolist will
a. reduce the gap between the monopoly and competitive output. b. increase the gap between the monopoly and competitive output. c. cause the monopolist to overproduce. d. cause the monopolist to decrease output.
Exhibit 17-5 Short-run and long-run Phillips curve
Suppose the government shown in Exhibit 17-5 uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have rational expectations, then:
A. the economy will remain stuck at point E1. B. the natural rate will permanently increase to 8 percent. C. unemployment will rise to 8 percent in the short run. D. unemployment will remain at 6 percent as the inflation rate falls.