Refer to Figure 9.1. Assume the economy is initially at point A. The initial change from a shock that increases investment expenditure is best represented by which short-run equilibrium combination of price level and real GDP?
A) P2; Y2
B) P3; Y2
C) P1; Y2
D) P2; Y1
C
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The "Law of Diminishing Marginal Returns" could also be termed the "Law of Increasing Marginal Costs."
Indicate whether the statement is true or false
Since classical economists believe that both V and Q are constants for an economy in short-run equilibrium, the equation of exchange becomes a theory in which:
a. the quantity of money explains prices. b. the quantity of money explains velocity. c. the quantity of money explains real GDP. d. changes in M cause changes in V. e. prices are never flexible
Beginning from a position of long-run equilibrium at the full-employment level of real GDP, the economy's short-run response to a decrease in the aggregate demand curve would be a: a. movement upward along the short-run aggregate supply curve
b. movement upward along the long-run aggregate supply curve. c. downward shift in the short-run aggregate supply curve. d. movement downward along the short-run aggregate supply curve.
In the United States, the average length of time people spend unemployed is
A) approximately one month. B) between two and three months. C) between ten and eleven months. D) greater than twelve months.