The different shapes of the aggregate supply curve:
A. Determine the level of reserves held by the banking system.
B. Result in the Fed's need for total control of the money supply.
C. Determine the impact of monetary policy on price level and output.
D. Explain why the Fed must respond to market instability.
C. Determine the impact of monetary policy on price level and output.
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Suppose all firms in a perfectly competitive industry have production processes characterized by the production function 
. Suppose the cost of labor is 20 and the cost of capital is 10.
a. Suppose that the industry is in long run equilibrium and that firms are using 1 unit of capital. What is the short run cost function of each firm?
b. Suppose there are 5,000 firms in long run equilibrium. What is the short run market supply function?
c. Suppose market demand is 
What is the equilibrium price?
d. Firms in this industry face a recurring fixed cost FC. What must FC be in order for this industry to indeed be in long run equilibrium with its 100 firms?
What will be an ideal response?
If the aggregate supply curve has its normal shape, deficit spending will increase
A. both GDP and the price level at about the same rate. B. the price level before it increases real GDP. C. the price level but decrease real GDP. D. real GDP before it increases the price level.
The country Stanley is at an above full-employment equilibrium. What will return Stanley to full-employment?
What will be an ideal response?
Refer to the information provided in Figure 6.3 below to answer the question(s) that follow.
Figure 6.3Refer to Figure 6.3. Molly?s budget constraint is AD. It would swivel to AB if the price of
A. CDs increased. B. DVDs decreased. C. DVDs increased. D. CDs decreased.