In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. At this point there is
A) an inflationary ga
B
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The measure of production that values output using base-year prices is called
A) underground GDP. B) nominal GDP. C) real GDP. D) value-added GDP.
Oil prices have risen temporarily, due to political uncertainty in the Middle East. An advisor to the Fed suggests, "Higher oil prices reduce aggregate demand. To offset this we must increase the money supply
Then the price level won't need to adjust to restore equilibrium, and we'll prevent a recession." Analyze this statement using the IS—LM model.
The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.
What will be an ideal response?
The nominal interest rate will be less than the real interest rate when
A) the rate of inflation is positive but decreasing. B) the rate of inflation is positive and increasing. C) the rate of inflation is negative. D) the real interest rate is negative.