Which of the following is incorrect?
A. As the American average price level rises, American goods become relatively more expensive so that our exports fall and our imports rise.
B. As the average price level falls, the interest rate declines, and interest-rate sensitive spending increases.
C. When the average price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending.
D. An increase in aggregate supply tends to increase real domestic output and reduce the average price level.
C. When the average price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending.
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Refer to Figure 15-11. In the dynamic model of AD-AS in the figure above, the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues policy. This will result in
A) unemployment rates higher than what would occur if no policy had been pursued. B) real GDP lower than what would occur if no policy had been pursued. C) short-term interest rates higher than what would occur if no policy had been pursued. D) inflation higher than what would occur if no policy had been pursued.
The “law” of diminishing returns rests on the “law” of variable input proportions.
Answer the following statement true (T) or false (F)
In the fooling model's labor market diagram, from an initial intersection point of the labor supply and demand curves, tracing "northeast" up the labor supply curve shows
A) what happens to real wages and employment when aggregate demand expands. B) what happens to real wages and employment when aggregate demand contracts. C) what workers think is happening to real wages if an aggregate demand expansion fools them. D) what firms think is happening to real wages if an aggregate demand expansion fools them.
Perfect competition and monopolistic competition are similar in that firms in both types of market structure will
A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters.