Using an aggregate demand graph, illustrate the impact of an increase in the price level on aggregate demand
What will be an ideal response?
This illustrates an increase in the price level on the aggregate demand curve. The actual movement is shown by moving from point B to point A. The price level moves up from P1 to P2, and the quantity of real GDP demanded declines from Y1 to Y2.
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Refer to Figure 15-3. What happens to the monopolist represented in the diagram in the long run?
A) It will be forced out of business by more efficient producers. B) It will raise its price at least until it breaks even. C) If the cost and demand curves remain the same, it will exit the market. D) The government will subsidize the monopoly to enable it to break even.
Describe the process that would occur in the long run in a competitive industry if there were economic profits. Illustrate this with a diagram.
What will be an ideal response?
Average income for adults still varies widely across gender and racial groups in the United States, which tells us:
A. race and gender differences cause differences in income. B. discrimination causes differences in income across race and gender groups. C. income is correlated with race and gender. D. All of these are true.
The proposition that the Fed should concentrate on price stability rather than reducing unemployment is
a. generally accepted by politicians, although few economists accept this proposal. b. largely accepted by most economists, although politicians do not agree. c. highly debatable, because many do not agree that price stability should be the most important goal. d. simply incorrect, and no one accepts this idea anymore.