How long is the long run?
In the long run, all inputs are variable. This is a different period of time for different firms. For electric power utilities, the long run is likely to be more than 10 years, given the long time it takes to build a generating plant. For a roadside seller of apples, the long run may be very short, as it takes little time to increase the size of the apple cart.
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In his 1967 address to the American Economic Association, Milton Friedman explained that increases in the money supply will temporarily reduce unemployment because:
a. wages do not respond to monetary policy. b. unions support policies that increase inflation. c. inflation benefits lenders. d. prices rise faster than wages.
Why is investment spending a highly volatile component?
What will be an ideal response?
Refer to the above figure. Line ACE is called
A. the savings function. B. the 45-degree line. C. the saving function. D. the consumption function.
Refer to the graph. An increase in investor concern about risk would be shown by:
A. an increase in the intercept.
B. a shift from line C to line B.
C. a shift from line A to line B.
D. a decrease in the risk-free interest rate.