Compare the effects of an increase in aggregate demand when the price level is fixed versus when it can change
What will be an ideal response?
The above figure shows the effects. An increase in aggregate demand from AD1 to AD2 causes real Gross Domestic Product (GDP) to increase, but the size of the increase is greater for AS1 than for AS2. When the price level can change, some of the impact of the increase in aggregate demand falls on the price level instead of output, whereas all of the impact is on output when the price level is fixed.
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The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment
Indicate whether the statement is true or false
Which of the following are reported as liabilities on a bank's balance sheet?
A) reserves B) checkable deposits C) consumer loans D) deposits with other banks
The empirical specification Q = AL3 + BL3 can be used to estimate
A. a family of U-shaped product curves. B. short-run cubic cost function. C. a short-run cubic production function. D. both a and c E. none of the above
Firms in a perfectly competitive industry
A. will earn an economic profit of zero in the long run. B. will always earn a profit in the short run. C. may earn either an economic profit or a loss in the long run. D. will always earn an economic profit in the long run.