Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:
A. both real GDP and the price level will fall.
B. real GDP will fall and the price level will rise.
C. real GDP will rise and the price level will fall.
D. both real GDP and the price level will rise.
Answer: A
You might also like to view...
How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?
What will be an ideal response?
Which equation is a plausible aggregate demand curve?
A) ? = 2 + 0.3Y B) Y = 50 - 1.25? C) Y = 250 - 80r D) ? = 5 - 0.4 (U – 6 ) E) none of the above
Think of the quantity theory of money: If M = 200, P = 100, and Q = 10, then V is
a. 20 b. 2 c. 10 d. 5 e. 2,000
Assume that the substitution effect dominates the income effect. When workers experience a positive price surprise, they
A. correctly perceive that their real wage rate has fallen, which leads them to work fewer hours. B. correctly perceive that their real wage rate has risen, which leads them to work more hours. C. incorrectly perceive that their real wage rate has fallen, which leads them to work fewer hours. D. incorrectly perceive that their real wage rate has risen, which leads them to work more hours.