Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?
An anticipated increase in aggregate demand will cause a higher short-run increase in prices. This is because an anticipated increase in aggregate demand causes the short-run aggregate supply to decrease due to expectations of higher future prices. In the long run, however, the increase in prices will be the same for both the anticipated and unanticipated increases in aggregate demand.
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Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer
What will be an ideal response?
Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?
a. Perfectly competition. b. Monopoly. c. Monopolistic competition. d. Oligopoly.
When you subtract the expected rate of inflation from the nominal rate of interest, you calculate the
a. real rate of interest. b. real rate of inflation. c. expected rate of interest. d. expected rate of price increases.
Which of the following would increase GDP?
a. buying a used car b. buying a newly constructed house c. buying an imported rug d. giving a domestically produced rug to charity