Which of the following adjustments will most likely occur when output exceeds the economy's long-run capacity?
a. Prices will decline, bringing actual output into balance with its potential.
b. The natural rate of unemployment will increase and, thereby, restore equilibrium.
c. Higher resource prices and costs will reduce short-run aggregate supply until output falls to the economy's long-run capacity.
d. Lower interest rates will increase the economy's long-run capacity and restore equilibrium.
C
You might also like to view...
The goods market equilibrium condition in an open economy shows that
A) NX = Sd - Id. B) Sd = NX - Id. C) Sd = Id - NX. D) Sd = Id.
Consider the above figure. This curve suggests that as the government raises the tax rate, a point will eventually be reached at which the revenues that are collected will
A) increase. B) decline. C) approach infinity. D) become negative.
The Fisher effect says that
a. the nominal interest rate adjusts one for one with the inflation rate. b. the growth rate of the money supply is negatively related to the velocity of money. c. real variables are heavily influenced by the monetary system. d. All of the above are correct.
The government is most involved in economic decisions in a country with a ______ economy.
a. mixed b. command c. market d. traditional