Which of the following is an assumption made by the dynamic model of aggregate demand and aggregate supply?
A) Aggregate demand and potential real GDP decrease continuously.
B) The aggregate demand curve shifts to the right except during periods when workers and firms expect higher wages.
C) Potential real GDP increases continuously during economic expansions and decreases continuously during economic recessions.
D) The short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages.
Answer: D
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A) 10.5 percent. B) 11.6 percent. C) 16 percent. D) 21 percent.
Why may a central bank intervene in the foreign exchange market when its currency is depreciating?
A) concerns about the country's exports becoming less competitive B) concerns about inflation C) concerns about deflation D) to sterilize the effects on the domestic economy
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a. can be expected to decrease b. will usually remain constant c. can be expected to increase d. drops from a high value to zero e. increases from zero to a high value
Constant returns to scale occur when the firm's long-run
a. total costs are constant as output increases. b. average total costs are constant as output increases. c. average cost curve is falling as output increases. d. average cost curve is rising as output increases.