Use the extended AD–AS model to explain how inflation depends on aggregate demand and not the level of real GDP.
What will be an ideal response?
Looking at the AD–AS graph, a shift in long-run AS causes the price level to lower significantly if aggregate demand remains the same, even though output has increased. However, if aggregate demand increases when long-run AS shifts outward, the price level does not decrease significantly, but rather will remain the same, decline slightly, or increase slightly depending on the extent of the shift of aggregate demand relative to aggregate supply. Thus the level of inflation depends on the change in aggregate demand and on a change in aggregate supply.
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Positive analysis:
A. aims at determining only the economic consequences of a particular policy. B. recommends whether a policy should be implemented. C. determines whether the consequences of a policy are desirable. D. depends on the analyst's values.
Who from among the following would be classified as employed?
A. Jack Little, a 21 year old new college graduate actively looking for his first job B. Brenda Smith, an 18 year old full-time college student C. Sarah Lopez, a retired public school teacher D. Mario Faubert, a NHL hockey player at home sick with the flu
If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?
A. MC = P. B. MC = ATC. C. MR = MC. D. P = MR.
Explain the reason behind the declining gap between average cost (AC) and average variable cost (AVC) curves at higher levels of output