If persistent inflation was due to declines in long-run aggregate supply, what pattern would be observed?
A. Only prices of services would increase; prices of goods would remain constant.
B. Increases in the price level would occur simultaneously with increases in real GDP.
C. Only prices of goods would increase; prices of services would remain constant.
D. Increases in the price level would occur simultaneously with decreases in real GDP.
Answer: D
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The costs to firms of changing prices are called
A) menu costs. B) redistribution costs. C) anticipation costs. D) money illusion costs.
Government can step in to make economic decisions that address problems markets create, but government action is also imperfect and may not reflect majority views. What situation can arise in which it would be very difficult to identify which choice the majority of voters approves?
a. Budget trading b. Vote cycling c. Logrolling d. Pork-barrel spending
According to a new Keynesian theorist, a correctly anticipated increase in aggregate demand will
A) cause the price level to increase by a greater amount in the short run than what a new classical rational expectations theorist would predict. B) cause the price level to increase by a smaller amount in the short run than what a new classical rational expectations theorist would predict. C) cause the price level to increase by the same amount in the short run that a new classical rational expectations theorist would predict. D) leave the price level unchanged in the short run, but Real GDP will increase more than what a new classical theorist would predict. E) leave the price level unchanged in the short run, but Real GDP will increase less than what a new classical theorist would predict.
Productivity is the amount of output produced by a unit of input.
Answer the following statement true (T) or false (F)