Is the actual amount of output that corresponds to the long-run aggregate supply curve fixed? Explain.
What will be an ideal response?
No. The long-run supply curve is vertical at the economy's potential level of output, which indicates that there isn't a long-run relationship between the rate of inflation and output. The potential level of output, though, is dependent on many factors, including the amount and quality of resources (inputs), the rate of improvements in technology, the rate of innovation and invention, the amount of investment, the rate of depreciation, the level of education etc. As a result, the level of potential output in many countries is usually increasing. So while we draw the long-run aggregate supply curve as vertical at the potential level of output, the curve is usually shifting to the right over time.
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When we consider our savings, interest rates _________ and inflation rates ___________ the value.
A. increase; decrease B. decrease; increase C. increase; increase D. have no real effect; decrease
The consumption function
A. is a relationship between annual consumption and annual disposable income in an economy. B. will shift upward if aggregate household wealth declines. C. implies that annual consumption in an economy will be zero if disposable income is zero. D. is a flat line with zero slope.
The value of goods produced in a previous year but sold in the current year is added to the GDP for the current year.
Answer the following statement true (T) or false (F)
About how much of the tax is paid by consumers in the form of higher prices?
A. 2 cents
B. 8 cents
C. 12 cents
D. 18 cents