Suppose the economy is at a short-run equilibrium GDP that lies below potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?
A) Output will decrease.
B) Prices will increase.
C) Unemployment will rise.
D) Short-run aggregate supply will shift to the right.
Answer: D
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According to Adam Smith, a well-governed society's wealth is positively related to
A) the division of demand. B) the division of labor. C) the degree to which society can eliminate scarcity. D) the degree to which society can encourage and promote greed.
Observations of consumer behavior suggest that when the price of gasoline rose above $3.50 per gallon, consumer demand for gas became considerably more price elastic
Indicate whether the statement is true or false
Adam Smith's book, The Wealth of Nations, was published at the time of the:
a. War of 1812 b. U.S. Declaration of Independence. c. U.S. Civil War. d. Great Depression.
When the Fed sells bonds and drains reserves from the banking system, thereby reducing the supply of money, this policy will
a. decrease short-term interest rates to a greater degree than long-term interest rates. b. decrease long-term interest rates to a greater degree than short-term interest rates. c. increase short-term interest rates to a greater degree than long-term interest rates. d. increase long-term interest rates to a greater degree than short-term interest rates.