Suppose the value of the CPI is 1.100 in year one, 1.160 in year two, and 1.270 in year three. Assume also that the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three. The price level is increasing, the inflation rate is ________, and the relative price of computers is ________.
A. increasing; decreasing
B. constant; increasing
C. increasing; increasing
D. constant; decreasing
Answer: A
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The long-run average cost curve
a. is a composite of short-run AC curves. b. shows the lowest possible short-run AC corresponding to each output level. c. depends on the firm's planning horizon. d. All of the above are correct.
If a price ceiling of $8 were placed in the market in the graph shown:
A. a shortage of 23 would occur. B. a shortage of 7 would occur. C. a shortage of 8 would occur. D. a shortage of 15 would occur.
In the 1960s, the monetarist school of thought held that
A) monetary and fiscal policy could explain most of the output fluctuations in U.S. history. B) there is a long-run tradeoff between inflation and unemployment. C) efforts to fine-tune the economy are likely to do more harm than good. D) all of the above E) none of the above
Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. lower; higher D. higher; potential