What factors determine the vertical shape of the aggregate supply curve in the long-run? Explain.
What will be an ideal response?
The long-run aggregate supply curve is vertical at the economy’s full-employment level of output. The shape of this curve is determined by flexible input and output prices that allow firms to adjust their profits so as to always have an incentive to produce at the full-employment level of output. In the long run, an increase in output prices will generate an increase in wages and input prices.
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Define the term price discrimination. What conditions must hold for a firm to be able to practice price discrimination? How are consumers affected by price discrimination?
What will be an ideal response?
What relationship is shown by a demand curve?
What will be an ideal response?
The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that
A) information about the Fed's plans will inevitably be leaked to the public. B) the Fed announces its goals before Congress and publishes its policy actions in the Federal Reserve Bulletin six weeks after they take place. C) the public would eventually figure out what the Fed's policies were, negating the Fed's surprise. D) competition in the money markets would neutralize the Fed's intervention.
U.S. corporations are not motivated to protect the interests of small shareholders
a. True b. False